Take-Two Interactive Software, Inc. entered into a definitive agreement to acquire Zynga Inc. for $11.8 billion on January 9, 2022. Under the agreement, Take-Two will acquire all the outstanding shares of Zynga Class A common stock in a cash and stock transaction valued at $9.861 per Zynga share, implying a total enterprise value of approximately $12.7 billion. Under the terms and subject to the conditions of the agreement, Zynga stockholders will receive $3.50 in cash and $6.361 in shares of Take-Two common stock for each share of Zynga common stock outstanding at the closing of the transaction. The transaction includes a collar mechanism on the equity consideration, so that if Take-Two's 20-day volume weighted average price (“VWAP”) ending on the third trading day prior to closing is in a range from $156.50 to $181.88, the exchange ratio would be adjusted to deliver total consideration value of $9.86 per Zynga share (including $6.36 of equity value based on that VWAP and $3.50 in cash). If the VWAP exceeds the higher end of that range, the exchange ratio would be 0.0350 per share, and if the VWAP falls below the lower end of that range, the exchange ratio would be 0.0406 per share. Within the collar range, the final number of Take-Two shares estimated to be issued on a fully diluted basis will range between approximately 50.3 million and 58.5 million shares. Upon closing of the transaction, current Take-Two stockholders will own between 67.2% and 70.4% and current Zynga stockholders are expected to own between 29.6% and 32.8% of the combined company on a fully diluted basis, respectively, including the shares associated with expected settlement of Zynga's two outstanding series of convertible notes due 2024 and 2026. The agreement also provides that at the effective time of the merger the (i) issued and outstanding options to purchase Zynga Common Stock will be assumed by Take-Two and automatically converted into options exercisable for shares of Take-Two Common Stock and (ii) issued and outstanding RSU and PSU Award covering Zynga Common Stock will be assumed by Take-Two and automatically converted into a Take-Two RSU and PSU Award with respect to shares of Take-Two, in each case pursuant to an exchange ratio, which shall be the sum of Exchange Ratio, and the quotient obtained by dividing the cash consideration of $3.50 per share by the Take-Two Common Stock Price. As part of the transaction, Take-Two has received committed financing from JPMorgan Chase Bank, N.A. which provides for a new unsecured bridge loan facility in an aggregate principal amount of $2.7 billion and intends to fund the cash component of the transaction through a combination of cash from its balance sheet as well as proceeds of new debt issuance. The merger agreement provides for a “go-shop” provision under which Zynga and its Board of Directors may actively solicit, receive, evaluate, and potentially enter negotiations with parties that offer alternative proposals during a 45-day period following the execution date of the definitive agreement, expiring on February 24, 2022.
The merger agreement provides for the payment of a “termination fee” upon the termination agreement in specified circumstances, including if the agreement is terminated by either Take-Two or Zynga as a result of an adverse change in the recommendation of the other party's board of directors, Take-Two is required to pay to Zynga (in the case of a termination by Zynga), or Zynga is required to pay to Take-Two (in the case of a termination by Take-Two), a termination fee of $550 million. In addition, Zynga is required to pay to Take-Two a termination fee of $550 million if Zynga terminates the agreement to enter into a definitive agreement for an alternative business combination transaction that constitutes a “superior proposal,” unless Zynga so terminates the agreement during the Go-Shop Period, in which case Zynga would be required to pay to Take-Two a lower termination fee of $400 million. If the agreement is terminated because Zynga's stockholders fail to approve the adoption of the agreement and the combination, and Take-Two's stockholders approve the issuance of the Stock Consideration and the adoption of Take-Two Charter Amendment, Zynga will be required to pay the Take-Two an expense reimbursement of $50 million. If the agreement is terminated because the Take-Two's stockholders fail to approve the issuance of the Stock Consideration and the adoption of the Take-Two Charter Amendment, and Zynga's stockholders approve the adoption of the agreement and the Combination, Take-Two will be required to pay to Zynga an expense reimbursement of $50 million.
At the close of the transaction, Strauss Zelnick will continue to serve as Chairman and Chief Executive Officer, and the management team of Take-Two will continue to lead the combined company. Zynga's highly skilled and proven management team, led by Frank Gibeau and Zynga's President of Publishing, Bernard Kim, will drive the strategic direction for Take-Two's mobile efforts and 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. Additionally, Take-Two will expand its Board of Directors to 10 members upon the closing of the transaction to add two members from Zynga's Board of Directors.
The transaction is subject to the approval of both Take-Two and Zynga stockholders and the satisfaction of customary closing conditions, including applicable regulatory approvals, the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and clearance under the antitrust laws of certain non-United States jurisdiction, there having not occurred a material adverse effect on the other party, Take-Two Charter Amendment shall have been duly filed with the Secretary of State, the shares of Take-Two common stock to be issued in the merger shall have been approved for listing on the NASDAQ, the effectiveness of a registration statement on Form S-4 with respect to shares of Take-Two common stock to be issued in the merger and Take-Two and Zynga shall have received a tax opinion that the combination will be treated as a reorganization qualifying under Section 368(a) of the Code. The transaction has been unanimously approved by the Take-Two and Zynga Boards of Directors. Moreover, each director and executive officer of Take-Two and Zynga have entered into voting agreements to support the transaction. The transaction is expected to be completed during the first quarter of Take-Two's Fiscal Year 2023, ending June 30, 2022. The transaction is expected to deliver approximately $100 million of annual cost synergies within the first two years after closing, and more than $500 million of annual Net Bookings opportunities over time. J.P. Morgan Securities LLC and LionTree Advisors LLC are serving as financial advisors to Take-Two and provided fairness opinion to the Board of Directors of Take-Two while Adam Turteltaub, Andres Mena, Matthew Makover, Geri Anne McEvoy, Isabel Araujo, Rahul Saha and Sean Ewen of Willkie Farr & Gallagher LLP, and Cahill Gordon & Reindel LLP are serving as legal counsel. Goldman Sachs & Co. LLC is acting as financial advisor to Zynga and provided fairness opinion provider to Zynga Board and Steven Beard, John Aguirre, Jaqueline Tokuda, Myra A. Sutanto Shen, Rebecca L. Stuart, Allison Ivey, Jamillia P. Ferris, Kimberley Biagioli, Jake Philipoom, Amy L. Simmerman, Ryan J. Greecher, Christopher A. Paniewski, Susan P. Reinstra, Martin R. Sul, Matt Staples, Joshua F. Gruenspecht, Tarek J. Helou, Anne E. Seymour, Ignacio E. Salceda, John Mao, Michael A. Occhiolini, Michael A. Rosati, Andrew Ralston, Martin Korman, Douglas Schnell and Remi Korenblit of Wilson Sonsini Goodrich & Rosati, Professional Corporation acted as the legal advisor to Zynga.

Take-Two Interactive Software, Inc. completed the acquisition of Zynga Inc for $12.1 billion on May 23, 2022. Under the terms of the merger agreement, Zynga stockholders received $3.5 in cash and 0.0406 shares of Take-Two common stock per share of Zynga common stock. On April 19, Putative Stockholder Class Action Complaint Filed Against Co Relating to Merger With Zynga Inc.take-two Interactive Software Inc - Agreed to Pay $130,000 in Attorneys' Fees and Expenses to Plaintiff's Counsel. On August 11, 2022, Court Entered an Order Closing the Case.