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Stock Strategist

What Take-Two's Purchase of Zynga Means

The combination will supercharge mobile transformation, Morningstar's analyst says.

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On Jan. 10, Take-Two Interactive (TTWO) announced an agreement to purchase mobile game publisher Zynga (ZNGA) in a deal valued at $12.7 billion, or $9.86 per share, based on Take-Two’s Jan. 7 closing price. The deal is for $3.50 in cash and $6.36 in equity, depending on the closing price of Take-Two. The deal price represents a 64% premium to the unaffected price of Zynga and is 20% below the 52-week high. Take-Two will fund the cash portion with cash on hand and a new debt offering. Because of the price collar, Take-Two shareholders will own 67%-70% of the combined company after the deal closes. Zynga does have a go-shop provision for 45 days, which could attract a higher bid.

Neil Macker does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.