Merger Arbitrage Mondays: Take-Two Acquires Zynga


  • The largest game company acquisition in history was announced last week.
  • Take-Two will acquire Zynga for $12.7 billion in a cash plus stock deal with the stock portion of the deal including "collars."
  • We have seen several bidding wars in recent months and it will be interesting to see if someone like EA steps in with a competitive offer.
  • Looking for more investing ideas like this one? Get them exclusively at Inside Arbitrage. Learn More »
Zynga headquarters in San Francisco.

JHVEPhoto/iStock Editorial via Getty Images

Merger activity remained steady last week with two new deals announced and one active deal completed.

The largest game company acquisition in history was announced last week. In 2018, Bloomberg reported that Zynga (ZNGA), the firm that created FarmVille and Words With Friends, had attracted takeover interest from other game developers amid a jump in dealmaking in the industry. ZNGA’s price after that report was $4.36.

Zynga has had a tumultuous decade with success in the early days of Facebook driving growth in FarmVille and then a subsequent slump that saw its founder and CEO Mark Pincus step down from the CEO role twice. It's interesting that the two San Francisco-based mobile gaming companies I used to follow, Glu Mobile and Zynga, have both been acquired during the last year.

Zynga entered into a definitive merger agreement to be acquired by Take-Two (NASDAQ:TTWO), owner of popular franchises like Grand Theft Auto, NBA 2K, and Red Dead Redemption. With this $12.7 billion acquisition, Take-Two plans to significantly accelerate and scale up its mobile gaming business. In recent months, gaming studios have been revealing plans to add NFTs to their games. The digital assets that are verified by blockchain technology, give proof of authenticity and ownership to gamers.

Zynga Games


Company Q3 2021 Investor Presentation

We have classified TTWO’s acquisition of ZNGA as a "special conditions" deal based on the collar mechanism mentioned below in the deal terms. Zynga stockholders will receive $3.50 in cash and $6.36 in shares of Take-Two common stock for each share of Zynga common stock outstanding at the closing.

According to the merger agreement, Take-Two’s acquisition proposal for Zynga includes a “go-shop” period that will allow Zynga to shop around for a better transaction with a different company over a period of 45 days. Take-Two’s proposal represents a 64% premium on Zynga’s share price and Zynga would have to pay a termination fee of $50 million if it signs with a different company. We have seen several bidding wars in recent months and it will be interesting to see if someone like EA, which closed its acquisition of Glu Mobile last May, might attempt to step in with a competitive offer. If the deal goes through, we could potentially see gamers playing GTA on mobile.

SPAC Arbitrage

SPAC activity increased with seven new SPAC IPOs filed. There was one new SPAC combinations announced last week. You can find the new SPAC IPO announcements in our SPACs tool here.

  1. Suneva Medical, an innovative medical technology company using regenerative medicine to change the standard of care in aesthetic treatments and Viveon Health Acquisition Corp. (VHAQ) announced that they have entered into a definitive merger agreement.

Weekly Spread Changes:

The table below shows weekly spread changes between January 7 and January 15, 2022.

Symbol Quote Acquiring Company Acquiring Company Quote Current Spread Last Week Spread Spread Change Weekly Deal Type
CSPR 5.4 Durational Capital Management LP (N/A) 27.78% 3.29% 24.49% All Cash
MNTV 17.77 Zendesk (ZEN) 100.41 27.14% 10.82% 16.32% All Stock
AJRD 42.98 Lockheed Martin Corporation (LMT) 363.25 18.66% 14.79% 3.87% All Cash
CHNG 20.58 UnitedHealth Group Incorporated (UNH) 468.69 25.12% 22.04% 3.08% All Cash
TMX 42.73 Rentokil Initial plc (OTCPK:RTOKY) 35.99 28.72% 26.23% 2.49% Special Conditions
PTRS 10.53 OceanFirst Financial Corp. (OCFC) 24.04 -1.42% 0.00% -1.42% Special Conditions
MIME 80.36 Permira (N/A) -0.45% 1.14% -1.59% All Cash
FVCB 20.435 Blue Ridge Bankshares, Inc. (BRBS) 18.25 2.63% 4.29% -1.66% All Stock
AZPN 155.92 Emerson Electric Co. (EMR) 97.47 2.62% 8.52% -5.90% Special Conditions
JOBS 49.58 Garnet Faith Limited (N/A) 59.44% 74.16% -14.72% All Cash

Deal Statistics:

Total Number of Deals Closed in 2022 7
Total Number of Pending Deals
Cash Deals 44
Stock Deals 24
Stock & Cash Deals 7
Special Conditions 7
Total Number of Pending Deals 82
Total Deal Size $475.18 billion

New Deals:

  1. The acquisition of Apria (APR) by Owens & Minor (OMI) for $1.62 billion or $37.50 per share in cash.
  2. The acquisition of Zynga (ZNGA) by Take-Two Interactive Software (TTWO) for $12.7 billion in a cash plus stock deal. Under the terms 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. The transaction is valued at $9.861 per share of Zynga common stock. 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.

Deal Updates:

  1. On January 12, 2022, Microsoft’s (MSFT) planned acquisition of Nuance Communications (NUAN) is being formally investigated by the U.K. Competition and Markets Authority to determine whether it will hamper competition in the U.K. The deadline for the CMA to announce its decision whether to refer the Merger for a Phase 2 investigation is therefore March 9, 2022.
  2. On January 12, 2022, 51job (JOBS) announced that its Board of Directors received a proposal letter from Garnet Faith Limited in connection with the proposed merger. In the Proposal Letter, the Merger Sub proposed to reduce the merger consideration from US$79.05 in cash per common share to US$57.25 in cash per common share.
  3. On January 12, 2022, Marlin Business Services (NASDAQ:MRLN) announced an update on its proposed merger with HPS Investment Partners. Marlin has now satisfied the De-Banking Condition and the parties intend to consummate the merger prior to the market open on Thursday, January 20, 2022.
  4. On January 13, 2022, Proofpoint offered to buy Mimecast (MIME) for $92.50 per share. Mimecast rejected the offer as it believed a transaction may have too many potential antitrust issues.
  5. On January 13, 2022, Santander Holdings USA announced that it has extended the expiration date of its previously announced tender offer to acquire all outstanding shares of common stock of Santander Consumer USA Holdings (SC). The Tender Offer is now scheduled to expire on January 20, 2022.

Closed Deals:

  1. The acquisition of Teekay LNG Partners (TGP) by Stonepeak on January 13, 2022. It took 100 days for this deal to be completed.

Top 10 deals with largest spreads:

Symbol Announced Date Acquiring Company Closing Price Last Price Closing Date Profit Annualized Profit
JOBS 06/21/2021 Garnet Faith Limited (N/A) $79.05 $49.58 03/31/2022 59.44% 293.18%
TMX 12/14/2021 Rentokil Initial plc (OTCPK:RTOKY) $55.00 $42.73 12/31/2022 28.72% 30.03%
CSPR 11/15/2021 Durational Capital Management LP (N/A) $6.90 $5.4 03/31/2022 27.78% 137.01%
MNTV 10/28/2021 Zendesk (ZEN) $22.59 $17.77 06/30/2022 27.14% 60.03%
CHNG 01/06/2021 UnitedHealth Group Incorporated (UNH) $25.75 $20.58 06/30/2022 25.12% 55.57%
XLNX 10/27/2020 Advanced Micro Devices, Inc. (AMD) $235.90 $198.45 03/31/2022 18.87% 93.08%
AJRD 12/20/2020 Lockheed Martin Corporation (LMT) $51.00 $42.98 03/31/2022 18.66% 92.04%
BRG 12/20/2021 Blackstone Real Estate (N/A) $29.85 $26.53 06/30/2022 12.51% 27.68%
ZNGA 01/10/2022 Take-Two Interactive Software, Inc. (TTWO) $9.86 $8.96 06/30/2022 10.04% 22.22%
COHR 03/25/2021 II-VI Incorporated (IIVI) $284.66 $259.65 01/31/2022 9.63% 234.34%


Current Zynga shareholders could wait to see how things play out in terms of a competitive bid or if Take-Two shares recover from the big drop last week. Given current market conditions, if current Zynga investors aren't risk arbitrageurs, for most of them exiting the position at this point would make sense instead of waiting through a close sometime in mid-2022.

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This article was written by

Asif Suria profile picture
Comprehensive tools and detailed analysis for event-driven investors

I am an entrepreneur and investor with a focus on event driven strategies including merger arbitrage, spinoffs, (legal) insider trading, buybacks and SPACs. I was one of the earliest contributors on Seeking Alpha and started publishing here in 2005. For more than a decade I have been writing every week about M&A and interesting insider transactions. My work has been mentioned in Barron's, Dow Jones, BNN Bloomberg and other publications.  

I have been an active investor for more than two decades and my background in technology has helped me built tools that inform my investing process, especially as it relates to event-driven strategies that require updated data and processes. The focus on my Inside Arbitrage service is to provide investors with the right combination of tools and analysis to help them take advantage of strategies that can perform well across market cycles.  


Disclosure: I/we have a beneficial long position in the shares of ARNA, BRG, CHNG, PFE either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Disclaimer: I have long positions in Arena Pharmaceuticals (ARNA), Bluerock Residential Growth REIT (BRG), Change Healthcare (CHNG) and Pfizer (PFE). I also have put options in Change Healthcare. Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.

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