Take-Two Interactive, maker of Grand Theft Auto and Red Dead Redemption, is buying Zynga, maker of FarmVille and Words With Friends, in a cash-and-stock deal valued at about $12.7 billion.
The acquisition announced Monday would wed a powerhouse in console gaming, Take-Two, with a mobile gaming company with an almost cult-like following.
Zynga shareholders will receive $3.50 in cash and $6.36 in shares of Take-Two common stock for each share of Zynga outstanding stock at closing. The transaction is valued at $9.86 per share of Zynga common stock.
The deal would be one of the largest in the history of the video game industry, topping the purchase of Supercell by Chinese internet giant Tencent in 2016 for $10 billion and Microsoft's acquisition of ZeniMax Media for $7.5 billion in 2020.
"This strategic combination brings together our best-in-class console and PC franchises, with a market-leading, diversified mobile publishing platform that has a rich history of innovation and creativity," Take-Two Chairman and Chief Executive Officer Strauss Zelnick said in a prepared statement. He will retain those roles when the companies become one.
Adding Zynga's stable of app developers is meant to help Take-Two roll out more smartphone versions of its popular titles. Zynga will also help Take-Two expand its revenue from so-called recurrent consumer spending, in which players pay for new content and upgrades within games.
Take-Two anticipates the deal will help bring about mobile versions of some of its console and personal computer based games.
Take-Two said Monday it anticipates approximately $100 million in annual cost savings within the first two years after the transaction is complete.
Zynga CEO Frank Gibeau and its president of publishing, Bernard Kim, will oversee the integration and day-to-day operations of the combined Zynga and T2 Mobile Games business, which will operate under the Zynga brand as its own label within Take-Two.
Take-Two will also expand its board to 10 members upon closing, adding two members from Zynga's board.
The transaction includes a go-shop provision, giving Zynga 45 days to hear alternative proposals.
The deal is expected to close during the first quarter of Take-Two's fiscal 2023, ending June 30. It still needs approval of both Take-Two and Zynga stockholders. It has received approval from both companies' boards.
The gaming industry has boomed during the pandemic, providing large tech companies with the cash to buy smaller rivals. It has also helped more troubled companies like Zynga, which found early success tying itself to Facebook with mobile game FarmVille. The company stumbled as the mobile gaming industry shifted away from social media and toward apps like Clash of Clans and Candy Crush.
Zynga has laid off employees and cycled through executives over the years as it struggled to maintain relevance. It was still losing money -- $42 million -- in its most recent quarterly earnings report.
By contrast, Take-Two is profitable and has gone on a buying spree since the pandemic, buying a handful of smaller studios to add to its portfolio of games.
Shares of Zynga Inc., based in San Francisco, jumped 40.7% to $8.44 in New York trading. Shares of Take-Two Interactive Software, Inc., based in New York City, fell 13% to $142.99.
Information for this article was contributed by Michelle Chapman of The Associated Press and by Michael J. de la Merced and Kellen Browning of The New York Times.