Zynga Inc. Selling for less than $10 a share, more than a decade after going public at that price and starting the takeover parade.
Take-Two Interactive Inc. TTWO
announced Monday that it plans to buy Zynga ZNGA
In a $12.7 billion cash and stock deal, Zynga’s share price is trading at an intraday high of $8.91, or 49% higher than Friday’s close. The proposed cash-and-stock deal would value Zynga’s shares at $9.86 — technically close but less than the magic number for a mobile-game company.
Zynga went public in December 2011 at $10 a share, and spent a few months after the initial public offering trading above that price. But Zynga shares dropped in 2012, as gamers left Facebook.,
Where “Farmville,” “Zynga Poker” and other early Zynga games found their fans, and moved to mobile.
Zynga bought OMGpop for the mobile game “Draw Something” in 2012, and the company spent billions on similar acquisitions over the next decade, while the share price remained under $10. According to FactSet Research, as of the end of 2020, Zynga had spent more than $2 billion in actual cash on acquisitions since going public. It does not fully reflect the value of the total declared deals but reflects the net cash spent on other companies.
In the past 18 months alone, Zynga has acquired six companies for declared prices of over $3 billion – Peak Games in July 2020 for $1.9 billion, Rolic Games in October 2020 for $180 million, and March for an undisclosed price Echtra Games bought Chartboost in August for $250 million, Starlark in October for $525 million, and ByteTyper in November for an undisclosed price. According to Crunchbase, over the company’s history, Zynga has made a total of 40 acquisitions.
See This Half-Billion Dollar Zynga Acquisition Has Just Done
Most of those acquisitions are doing the heavy lifting at Zynga, according to Dennis Ye, senior insight analyst at app analytics data firm SensorTower.
“It’s worth noting that most of Zynga’s current top games are from recently acquired studios,” Ye said. “Although Zynga rose to prominence on the success of its in-house titles … over the years the mobile game publishing giant has developed a reputation as an acronym of rapidly growing mobile franchises.”
Ye noted that the top-performing Zynga game from a player-spending perspective in 2021 was “Toon Blast”, which was acquired in the Peak Games deal and generated $415 million in player spending. “Empire and Puzzles” from Small Giant, according to SensorTower data, was close to a total with $378 million in player spending last year.
Ye said, “Following the strategic purchases of Village Games, Small Giant and Peak Games, the acquired titles account for approximately 65% of their 2021 in-game bookings (not including new games launched by the studio since the acquisition).
After years of struggling stock prices, Zynga turned things around to push things into the bigger and more notable videogame world, and shares finally topped $10 again in 2020 for the first time since the start of 2012, and Maintained that level in 2021. However, from June 1, 2020 — when Zynga first announced the peak deal — until Friday’s close, Zynga’s shares had fallen 34%, or 40%, from the company’s 2011 IPO price of $10 per share.
Investors didn’t think Take-Two got a deal with its purchase of Zynga for less than the IPO price. Take-Two shares were headed for their biggest one-day fall since 2009 in Monday’s trading session after the deal was announced, down more than 15% from Friday’s closing price.
For more: Take-Two stock heads for worst fall since 2009 amid plans to acquire Zynga in $12.7 billion deal
“Take-Two Interactive committed to paying a meaningful premium over Zynga’s previous closing share price,” NPD Group analyst Matt Piscatella told Businesshala in emailed comments. “So, it’s not so much a question of whether the opportunity exists here (I think it clearly does), but rather the time and cost.”
Piscatella said that “strategically, it makes sense” for Take-Two to acquire Zynga, adding the mobile asset that Activision Blizzard Inc. There are competitors like ATVI.,
The company, which bought “Candy Crush” maker King Digital in 2015, has already acquired.
“Mobile is the largest, and fastest growing, video game content market. And some of the biggest assets on mobile now include IP with a console/PC route such as [Epic Games’] ‘Fortnite,’ [Microsoft Corp.’s
]’Minecraft’ and [Activision’s] ‘Call of duty,'” Piscatella said. “Zynga also has experience and capabilities in many of the areas Take-Two Interactive’s opportunities are.”
“The videogame market is moving more towards properties that allow consumers to engage with them, whether on console, PC, mobile or wherever gaming may lead,” he said. “And the higher the scale in a game, the more gravity there is likely to be both in attracting new players and in encouraging existing players to play more.
“From that perspective, expanding capabilities such as the one that Zynga offers is likely to be a positive,” Piscatella said.