Take-Two Can Thank Apple for Zynga
App Store changes have battered the mobile game maker’s stock, creating an opening for a deal
By Dan Gallagher
Heard on the Street
Wall Street Journal
Jan. 10, 2022 11:53 am ET
Give Take-Two Interactive Software TTWO -14.71% some credit: They know a deal when they see one.
The publisher of blockbuster videogames such as “Grand Theft Auto” and “Red Dead Redemption” announced a deal Monday morning to buy mobile game publisher Zynga ZNGA +44.75% for about $12.7 billion in cash and stock. It will create a videogame giant projected to generate about $7 billion in combined net bookings for the calendar year 2022, leveling up Take-Two significantly against its top rivals Activision Blizzard and Electronic Arts, which are projected to do between $8 billion and $9 billion in net bookings this year, according to FactSet.
The price represents a 64% premium over Zynga’s previous close, but it is nearly on par with the stock’s price last August, before Zynga’s second-quarter results that first showed the impact of changes Apple Inc. AAPL -1.87% made to its App Store. Those changes make it harder for advertisers to track users to sell targeted ads, harming the ability of mobile game companies such as Zynga to acquire new players. Zynga’s share price crashed 18% the day after that earnings release and kept dropping. More than one-third of the company’s market value has since been wiped out.
Take-Two’s offer therefore has an opportunistic bent. And with Zynga well-versed in the mergers-and-acquisition game, having closed half a dozen deals itself over the past four years, the move’s timing strongly suggests the company doesn’t see matters improving soon. In its latest report in November, Zynga projected net bookings growth of just 2% year over year for the fourth quarter. That would be the company’s worst growth in five years and a sharp comedown from its recent record; Zynga’s net bookings have grown by 46% on average over the last 12 quarters. Zynga Chief Executive Frank Gibeau told an investors’ conference last month that the changes enacted by Apple were “pretty profound,” though he added then that “we think most of it is behind us.”
It isn’t the first time Zynga has found itself at the whims of tech giants. The company made its name with popular social games such as “FarmVille” on Facebook, only for that business to collapse after changes by the social network hurt Zynga’s player acquisition. Combining with Take-Two will create a more-diversified gaming company with exposure across the console, PC and mobile segments. It also follows a pattern: Activision picked up “Candy Crush” maker King Digital for nearly $6 billion in 2015, and EA grabbed Glu Mobile for $2.4 billion last year.
Even with Apple’s mood swings, game publishers have learned well that the console in everyone’s pocket can’t be ignored.
Take-Two Can Thank Apple for Zynga - WSJ |
