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Zynga Stock Soars After $12.7 Billion Takeover Bid From Take-Two Interactive

Grand Theft Auto maker Take-Two will pay $9.86 per share for Zynga in a deal that values the social gaming group at around $12.7 billion.

Take-Two Interactive  (TTWO) - Get Take-Two Interactive Software, Inc. Report said Monday it will buy Zynga  (ZNGA) - Get Zynga Inc. Class A Report in a $12.7 billion deal that combines the maker of video game hits such as Grand Theft Auto and NBA 2k with the leading developer of mobile and social gaming network platforms.  

The cash-and-stock deal values Zynga at $9.68 per share, the companies said, and pegs the San Francisco-based group's -- and maker of the social video game Farmville -- enterprise value at around $12.7 billion. Take-Two will pay $3.50 in cash and $6.36 in Take-Two common stock for each Zynga share, the companies said. 

Take-Two CEO Strauss Zelnick will lead the combined group once the deal is closed, which the pair anticipate will be in the second half of this calendar year. Take-Two shareholders will own between 67.2% and 70.4% of the combined groups when the deal is completed. 

“We are thrilled to announce our transformative transaction with Zynga, which significantly diversifies our business and establishes our leadership position in mobile, the fastest growing segment of the interactive entertainment industry,” said Zelnick. “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. Zynga also has a highly talented and deeply experienced team, and we look forward to welcoming them into the Take-Two family in the coming months."

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"As we combine our complementary businesses and operate at a much larger scale, we believe that we will deliver significant value to both sets of stockholders, including $100 million of annual cost synergies within the first two years post-closing and at least $500 million of annual Net Bookings opportunities over time,” he added.  

Zynga shares soared more than 45% in early Monday trading immediately following news of the deal to change hands at $8.70 each. 

Take-Two shares, meanwhile, were marked 13.7% lower at $142.07 each. 

"We see this as a positive outcome for Zynga shareholders that should accelerate the vision for more cross-platform opportunities augmented by Take-Two's expertise," said KeyBanc Capital Markets analyst Tyler Parker. "And from the Take-Two side we see this as a smart strategic move to meaningfully increase mobile exposure and accelerate their position to operate against the largest and fastest-growing segment of gaming."  

Take-Two reported pro-forma earnings of $1.63 per share for its fiscal second quarter, which ended in September, on revenues of $985 million. 

The New York-based video game maker said it sees full-year revenues in the region of $3.3 billion to $3.4 billion  -- a modest increase from its previous forecast -- with earnings between $4.20 and $4.45 per share.