Grand Theft Auto maker Take-Two to buy FarmVille creator Zynga for $15b in largest gaming deal

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NEW YORK (REUTERS, AFP) – Grand Theft Auto video game maker Take-Two Interactive said on Monday (Jan 10) it would buy Zynga for US$11.04 billion (S$14.94 billion) in a cash-and-stock deal that will add popular mobile titles such as FarmVille under its umbrella as demand surges for on-the-go gaming.

The deal, the largest ever in the sector, will create a gaming powerhouse with a market cap of nearly US$30 billion, spanning console, PC and mobile devices at a time that more people are gaming on their smartphones.

The deal comes as Take-Two plans more smart phone versions of its games, which also include Red Dead Redemption and NBA2K.

The transaction also is designed to promote Take-Two’s growth outside of its core markets in the United States and Western Europe. Take-Two officials emphasised that Zynga has a presence in more than 175 countries.

Zynga’s games are generally free to play and the company generates revenues through the sale of in-game virtual items and advertising.

Take-Two offered US$3.50 in cash and US$6.361 in shares for each Zynga share, a 64 per cent premium to the last closing price. Including debt, the acquisition is worth $12.7 billion.

“It’s a bombshell deal… Zynga was on the list of potential M&A transactions for a long time in the video game business,” said Dr Serkan Toto, chief executive officer of video game consulting firm Kantan Games.

“Take-Two is looking at the industry map and says ‘we have basically nothing here’. So, a lot of people have been have been expecting Take-Two to make a big deal in mobile to close the gap with competitors like Electronic Arts for example.”

Mr Michael Pachter, a video gaming specialist at Wedbush Securities, views the proposed purchase as a “wise move” for Take-Two.

“The deal transforms Take-Two from 10 per cent mobile to over 50 per cent, and mobile is the fastest growing segment of video games,” he said.

Take-Two chief executive Strauss Zelnick said in a statement: “We are thrilled to announce our transformative transaction with Zynga, which significantly diversifies our business and establishes our leadership position in mobile, the fastest growing segment of the interactive entertainment industry.”

Mr Zelnick, in a conference call with analysts, highlighted Zynga’s expertise in free-to-play games which could allow for greater growth in India, parts of Latin America and the Middle East.

“We basically have 80 per cent of the world’s geography that is greenfield opportunity for us,” Mr Zelnick said. “Large parts of that geography really is driven by free-to-play and that’s where Zynga’s expertise lies.”

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