| suffered by its business as a result of the pendency of the combination or of the strategic initiatives forgone by Zynga during this period; (6) the contractual and legal remedies available to Zynga in the event of the termination of the merger agreement may be insufficient, costly to pursue or both; and (7) investors, employees, business partners and players may develop an adverse perception about Zynga’s prospects as a result of the failure of the combination to be consummated; |
| • | Impact of Interim Restrictions on Zynga’s Business Pending the Completion of the Combination. The restrictions on the conduct of Zynga’s business prior to the consummation of the combination, which could delay or prevent Zynga from undertaking business opportunities that may arise, or taking other actions with respect to its operations that the Zynga board of directors and management might believe were appropriate or desirable; and |
| • | Interests of Zynga’s Directors and Executive Officers. The interests that Zynga’s directors and executive officers may have in the combination, which may be different from, or in addition to, those of Zynga’s other stockholders. |
This discussion is not meant to be exhaustive. Rather, it summarizes the material reasons and factors evaluated by the Zynga board of directors in its consideration of the merger agreement and the transactions contemplated thereby. After considering these and other factors, the Zynga board of directors concluded that the potential benefits of entering into the merger agreement outweighed the uncertainties and risks. In the light of the variety of factors considered by the Zynga board of directors and the complexity of these factors, the Zynga board of directors did not find it practicable to, and did not, quantify or otherwise assign relative weights, ranks or values to the factors that it considered in reaching its determination and recommendations. Moreover, each member of the Zynga board of directors applied his or her own personal business judgment to the process and may have assigned different relative weights, ranks or values to the different factors. The Zynga board of directors approved the merger agreement and the transactions contemplated thereby, and recommended that Zynga stockholders adopt the merger agreement, based upon the totality of the information presented to, and considered by, the Zynga board of directors.
The foregoing discussion of the information and factors considered by the Zynga in approving the merger agreement is forward looking in nature. This information should be read in the light of the factors discussed in the section titled “Cautionary Statement Regarding Forward-Looking Information.”
Opinions of Take-Two’s Financial Advisors
Opinion of J.P. Morgan Securities, LLC
Pursuant to an engagement letter, Take-Two retained J.P. Morgan as its financial advisor in connection with the proposed combination.
At the meeting of the Take-Two board of directors on January 9, 2022, J.P. Morgan rendered its oral opinion to the Take-Two board of directors, subsequently confirmed by delivery of J.P. Morgan’s written opinion to the Take-Two board of directors, dated January 9, 2022, that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing its opinion, the merger consideration to be paid by Take-Two in the proposed merger was fair, from a financial point of view, to Take-Two.
The full text of the written opinion of J.P. Morgan dated January 9, 2022, which sets forth, among other things, the assumptions made, matters considered and limits on the review undertaken, is attached as Annex B to this joint proxy statement/prospectus and is incorporated herein by reference. The summary of the opinion of J.P. Morgan set forth in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of such opinion. Take-Two’s stockholders are urged to read the opinion in its entirety. J.P. Morgan’s written opinion was provided to the Take-Two board of directors (in its capacity as such) in connection with and for the
purposes of its evaluation of the proposed combination, was directed only to the merger consideration to be paid in the combination and did not address any other aspect of the combination. J.P. Morgan expressed no opinion as to the fairness of the merger consideration to the holders of any class of securities, creditors or other constituencies of Take-Two or as to the underlying decision by Take-Two to engage in the proposed combination. The issuance of J.P. Morgan’s opinion was approved by a fairness committee of J.P. Morgan. J.P. Morgan’s opinion does not constitute a recommendation to any stockholder of Take-Two as to how such stockholder should vote with respect to the proposed combination or any other matter.
In arriving at its opinion, J.P. Morgan, among other things:
| • | reviewed a draft execution version dated January 9, 2022 of the merger agreement; |
| • | reviewed certain publicly available business and financial information concerning Zynga and Take-Two and the industries in which they operate; |
| • | compared the proposed financial terms of the combination with the publicly available financial terms of certain mergers involving companies J.P. Morgan deemed relevant and the consideration received for such companies; |
| • | compared the financial and operating performance of Zynga and Take-Two with publicly available information concerning certain other companies J.P. Morgan deemed relevant and reviewed the current and historical market prices of Zynga common stock and Take-Two common stock and certain publicly traded securities of such other companies; |
| • | reviewed certain internal financial analyses and forecasts prepared by the managements of Zynga and Take-Two relating to their respective businesses, including the Take-Two standalone projections and Zynga standalone projections as of December 2021 (each as defined and summarized in the sections “—Zynga Unaudited Prospective Financial Information” and “—Take-Two Unaudited Prospective Financial Information”), as well as the synergy projections (as defined and summarized in the section titled “—Take-Two Unaudited Prospective Financial Information”) prepared by the management of Take-Two; and |
| • | performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate for the purposes of its opinion. |
In addition, J.P. Morgan held discussions with certain members of the management of Zynga and Take-Two with respect to certain aspects of the merger, and the past and current business operations of Zynga and Take-Two, the financial condition and future prospects and operations of Zynga and Take-Two, the effects of the combination on the financial condition and future prospects of Take-Two, and certain other matters J.P. Morgan believed necessary or appropriate to its inquiry.
In giving its opinion, J.P. Morgan relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with LionTree by Zynga and Take-Two or otherwise reviewed by or for J.P. Morgan. J.P. Morgan did not independently verify any such information or its accuracy or completeness and, pursuant to its engagement letter with Take-Two, J.P. Morgan did not assume any obligation to undertake any such independent verification. J.P. Morgan did not conduct and was not provided with any valuation or appraisal of any assets or liabilities, nor did J.P. Morgan evaluate the solvency of Zynga or Take-Two under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to J.P. Morgan or derived therefrom, including the synergy projections, J.P. Morgan assumed that they were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management of Take-Two as to the expected future results of operations and financial condition of Take-Two and Zynga to which such analyses or forecasts relate. J.P. Morgan expressed no view as to such analyses or forecasts (including the synergy projections) or the assumptions on which they were based. J.P. Morgan made certain assumptions, at the direction of management of Take-Two, with respect to the treatment of and/or adjustments under, as applicable, the terms of the convertible senior notes
indentures and the capped call documentation (both as defined in the merger agreement), in connection with the merger. J.P. Morgan also assumed that the combination and the other transactions contemplated by the merger agreement will qualify as a tax-free reorganization for United States federal income tax purposes, and will be consummated as described in the merger agreement, and that the definitive merger agreement would not differ in any material respects from the draft execution version thereof furnished to J.P. Morgan. J.P. Morgan also assumed that the representations and warranties made by Take-Two and Zynga in the merger agreement and the related agreements were and will be true and correct in all respects material to its analysis. J.P. Morgan is not a legal, regulatory or tax expert and has relied on the assessments made by advisors to Take-Two with respect to such issues. J.P. Morgan further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the combination will be obtained without any adverse effect on Zynga or Take-Two or on the contemplated benefits of the combination.
The Zynga standalone projections as of December 2021 and the Take-Two projections furnished to J.P. Morgan were prepared by the managements of Zynga and Take-Two, respectively, as defined and discussed more fully under “—Take-Two Unaudited Prospective Financial Information” and “—Zynga Unaudited Prospective Financial Information”, beginning on page 109 of this joint proxy statement/prospectus. Take-Two and Zynga do not publicly disclose internal management projections of the type provided to J.P. Morgan in connection with J.P. Morgan’s analysis of the proposed combination, and such projections were not prepared with a view toward public disclosure. These projections were based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of the management of Zynga and Take-Two, including, without limitation, factors related to general economic and competitive conditions and prevailing interest rates. Accordingly, actual results could vary significantly from those set forth in such projections. For more information regarding the use of projections and other forward-looking statements, please refer to the section entitled “Cautionary Statements Regarding Forward Looking Statements” beginning on page 22 of this joint proxy statement/prospectus.
J.P. Morgan’s opinion was necessarily based on economic, market and other conditions as in effect on, and the information made available to J.P. Morgan as of, the date of such opinion. J.P. Morgan’s opinion noted that subsequent developments may affect such opinion and that J.P. Morgan does not have any obligation to update, revise, or reaffirm such opinion. J.P. Morgan’s opinion is limited to the fairness, from a financial point of view, of the merger consideration to be paid by Take-Two in the proposed merger and J.P. Morgan expressed no opinion as to the fairness of the merger consideration to the holders of any class of securities, creditors or other constituencies of Take-Two or as to the underlying decision by Take-Two to engage in the combination. Furthermore, J.P. Morgan expressed no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the combination, or any class of such persons relative to the merger consideration to be paid by Take-Two in the combination or with respect to the fairness of any such compensation. J.P. Morgan expressed no opinion as to the price at which the Take-Two common stock or the Zynga common stock will trade at any future time.
As a part of its investment banking business, J.P. Morgan and its affiliates are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for corporate and other purposes. J.P. Morgan was selected to advise Take-Two with respect to the proposed combination on the basis of, among other things, such experience and its qualifications and reputation in connection with such matters and its familiarity with Take-Two and the industries in which it operates.
For services rendered in connection with the combination, Take-Two has agreed to pay J.P. Morgan $34.0 million, of which $3.0 million was payable in connection with delivery of J.P. Morgan’s opinion and $31.0 million is contingent and payable upon the effective time. In addition, Take-Two has agreed to reimburse J.P. Morgan for certain expenses incurred in connection with its services and indemnify J.P. Morgan for certain liabilities arising out of its engagement. During the two years preceding the date of J.P. Morgan’s opinion letter,
