Video games: Take-Two (GTA) buys Zynga (Farmville), a mega-acquisition at $ 12.7 billion

Posted on Jan 10, 2022 4:35 PMUpdated Jan 10, 2022, 5:26 PM

It has been almost fourteen years since the video game industry has witnessed a transaction of this magnitude. On Monday, the American publisher Take-Two (behind the flagship licenses Grand Theft Auto [GTA] and Red Dead) announced that it was buying Zynga, one of the heavyweights of mobile video games, on the basis of an 11-figure valuation: $ 12.7 billion.

In detail, nearly a third of the transaction will be settled in cash and the rest will be in shares of Take-Two, which had a market capitalization of nearly $ 19 billion at the close of Wall Street on Friday. This makes it the third historical publisher of PC games and home consoles behind EA (37 billion) and Activision Blizzard (50 billion).

With this acquisition, Take-Two will considerably strengthen its mobile division, which is still modest. At the last tally in November, Take-Two’s mobile revenue was $ 115 million in the third quarter, or 13% of its total revenue, compared to 70% for home consoles. Between July and September, Zynga had generated revenues of $ 704 million.

A catalog of very popular franchises

“Synergies will be achieved in particular on the monetization mechanisms within games which are getting closer and closer between the world of mobile and console and PC games”, argues Charles Louis Planade, video game financial analyst at TP ICAP . “Take-Two will also be able to rely on Zynga’s skills to bring some of its home licenses to mobiles. “

At the same time, the group will also get their hands on a catalog of very popular franchises on smartphones and tablets: Farmville, Zynga Poker, Empires & Puzzles and even Words With Friends. “Casual” games (a game that is easy to access and intended for a very large audience) light years away from the DNA of Take-Two, which has made a name for itself with GTA or “Red Dead Redemption” games , titles with several hundred million dollars of development budget and requiring several years of production.

Mobile, the only growing segment of the sector in 2021

The fact remains that this alloy of two cultures at the antipodes has already proven its worth in the sector. “This operation is really to be compared to the takeover of King (Candy Crush) completed by Activision in 2016 and which has borne fruit for the latter,” rewinds Charles Louis Planade. At the time, Take-Two’s rival had spent nearly $ 6 billion for this operation. Since then, the weight of mobile gaming in the sector has only increased.

Last year, the video game segment was the only one in growth over one year, to 93.2 billion dollars, according to Newzoo. That is to say an increase of 7.3% compared to the year 2020. A performance all the more notable since all the other parts of the industry (home consoles, PC, browser games) fell over the same period after an exceptional 2020 financial year for the entire industry. For the first time in history, last year, mobile also generated more than half (52%) of the total revenue generated from game sales. A symbolic milestone.

The second largest transaction in the history of the sector

As a result, the historical publishers of PC and console games are now really deploying there after years of hesitation, sometimes fearing to “damage” the image of their noblest licenses with gaming experiences below those offered on other media.

A year ago, EA (Fifa) spent $ 2.1 billion to buy Glu, a publisher of mobile games who made a name for themselves with “Kim Kardashian: Hollywood”. One way to expand its catalog of titles dedicated to smartphones and tablets. A few weeks earlier, the American giant had also signed a check for 1.2 billion to acquire Codemasters (publisher of racing games on PC and home consoles) in the face and beard of a certain… Take- Two.

At the time, the publisher’s price suffered as a result, the financial markets then blaming him for his lack of transactional appetite. “We are in a position to conduct a number of deals,” replied Take-Two CEO Strauss Zelnick. Last June, he first bought the Nordeus mobile studio for $ 225 million. A first response.

This Monday, he completed the second largest transaction in the history of the sector, ahead of the takeover of Supercell (“Clash of Clans”) by Tencent for 8.6 billion dollars in 2016 and behind the merger at nearly 19 billion between Vivendi Games and Activision in 2008 giving birth to Activision Blizzard.

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