PERSONAL AND CONFIDENTIAL
January 9, 2022
Board of Directors
Zynga Inc.
699 8th Street
San Francisco, California 94103
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of view to the holders (other than Take-Two Interactive Software, Inc. (“Take-Two”) and its affiliates) of the outstanding shares of Class A Common Stock, par value $0.00000625 per share (the “Shares”), of Zynga Inc. (the “Company”) of the Consideration (as defined below) to be paid to such holders pursuant to the Agreement and Plan of Merger, dated as of January 9, 2022 (the “Agreement”), by and among Take-Two, Zebra MS I, Inc., a wholly owned subsidiary of Take-Two (“Merger Sub 1”), Zebra MS II, Inc., a wholly owned subsidiary of Take-Two (“Merger Sub 2”), and the Company. Pursuant to the Agreement and on the terms and subject to the conditions set forth in the Agreement (A) at the Effective Time (as defined in the Agreement) Merger Sub 1 will be merged with and into the Company with the Company surviving the merger and each issued and outstanding Share (other than any Dissenting Shares or Treasury Shares, each as defined in the Agreement) will be converted into the right to receive $3.50 in cash (the “Cash Consideration”) and that number of shares (and cash in lieu of any fraction thereof) of common stock, par value $0.01 per share (“Take-Two Common Stock”), of Take-Two equal to (a) if the Parent Common Stock Price (as defined in the Agreement) is greater than $181.88, 0.0350; (b) if Parent Common Stock Price is greater than or equal to $156.50 but less than or equal to $181.88, the quotient (rounded to five decimal places) obtained by dividing $6.36 by the Parent Common Stock Price; and (c) if the Parent Common Stock Price is less than $156.50, 0.0406 (the “Stock Consideration”; together with the Cash Consideration, the “Consideration”) and (B) immediately following the Effective Time, the Company will merge with and into Merger Sub 2 with Merger Sub 2 surviving the merger.
Goldman Sachs & Co. LLC and its affiliates are engaged in advisory, underwriting and financing, principal investing, sales and trading, research, investment management and other financial and non-financial activities and services for various persons and entities. Goldman Sachs & Co. LLC and its affiliates and employees, and funds or other entities they manage or in which they invest or have other economic interests or with which they co-invest, may at any time purchase, sell, hold or vote long or short positions and investments in securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments of the Company, Take-Two, any of their respective affiliates and third parties, or any currency or commodity that may be involved in the transaction contemplated by the Agreement (the “Transaction”). We have acted as financial advisor to the Company in connection with, and have participated in certain of the negotiations leading to, the Transaction. We expect to receive fees for our services in connection with the Transaction, the principal portion of which is contingent upon consummation of the Transaction, and the Company has agreed to reimburse certain of our expenses arising, and indemnify us against certain liabilities that may arise, out of our engagement. We have provided certain financial advisory and/or underwriting services to the Company and/or its affiliates from time to time for which our Investment Banking Division has received, and may receive, compensation, including having acted as an initial purchaser with respect to the offering of the Company’s 0.25% Convertible Senior Notes due 2024 in June 2019 (aggregate principal amount of $690,000,000) (the “Convertible Notes due 2024”) and as an initial purchaser with respect to the offering of the Company’s 0% Convertible Senior Notes due 2026 in December 2020 (aggregate principal amount $874,500,000) (the “Convertible Notes due 2026”; together with the Convertible Notes due 2024, the “Convertible Notes”). We may also in the future provide financial advisory and/or underwriting services to the Company, Take-Two and their respective affiliates for which our Investment Banking Division may receive compensation.
D-1
Board of Directors
Zynga Inc.
January 9, 2022
Page 2
We further note that concurrent with the issuance of the Convertible Notes the Company entered into capped call transactions with respect to the Convertible Notes (collectively, the “Capped Call Transactions”) with Goldman Sachs & Co. LLC (with respect to the Convertible Notes due 2024, 50%, and with respect to the Convertible Notes due 2026, 25%) and other counterparties each acting as principal for its own account, consisting of the purchase by the Company of capped call options with respect to collectively approximately 83,100,000 and 66,900,000 shares of the Company’s Class A Common Stock, the aggregate number of shares of the Company’s Class A Common Stock underlying the Convertible Notes due 2024 and the Convertible Notes due 2026, respectively. The Capped Call Transactions may be adjusted, exercised, cancelled and/or terminated in accordance with their terms in connection with certain events, including the announcement or consummation of the Transaction. In particular, under the terms of the Capped Call Transactions, each of Goldman Sachs & Co. LLC and the other counterparties, each acting separately as calculation agent under the Capped Call Transactions to which it is a party, is entitled in certain circumstances to make adjustments to the exercise price of the embedded call options sold by the Company to Goldman Sachs & Co. LLC and the other counterparties to reflect the economic effect of the announcement of the Transaction on the Capped Call Transactions. In addition, each of Goldman Sachs & Co. LLC and the other counterparties may, each acting separately as the calculation agent, determining party or otherwise as principal under the Capped Call Transactions to which it is a party, determine such additional adjustments and/or value owed upon termination or cancellation in respect of such Capped Call Transactions in accordance with their terms and pay any amounts due to the Company under various circumstances, including on or following consummation or abandonment of the Transaction. All actions or exercises of judgment by Goldman Sachs & Co. LLC, in its capacity as calculation agent, pursuant to the terms of the Capped Call Transactions to which it is a party must be performed in good faith and a commercially reasonable manner.
In connection with this opinion, we have reviewed, among other things, the Agreement; the annual reports to stockholders and Annual Reports on Form 10-K of the Company for the five fiscal years ended December 31, 2020; the annual reports to stockholders and Annual Reports on Form 10-K of Take-Two for the five fiscal years ended March 31, 2021; certain interim reports to stockholders and Quarterly Reports on Form 10-Q of the Company and Take-Two; certain other communications from the Company and Take-Two to their respective stockholders; certain publicly available research analyst reports for the Company and Take-Two; and certain internal financial analyses and forecasts for the Company prepared by its management and for Take-Two standalone prepared by its management, and certain financial analyses and forecasts for Take-Two pro forma for the Transaction prepared by the management of the Company, in each case, as approved for our use by the Company (collectively, the “Forecasts”), and certain operating synergies projected by the management of Take-Two to result from the Transaction, as approved for our use by the Company (the “Synergies”). We have also held discussions with members of the senior managements of the Company and Take-Two regarding their
assessment of the strategic rationale for, and the potential benefits of, the Transaction and the past and current business operations, financial condition and future prospects of Take-Two and with members of the senior management of the Company regarding the past and current business operations, financial condition and future prospects of the Company; reviewed the reported price and trading activity for the Shares and shares of Take-Two Common Stock; compared certain financial and stock market information for the Company and Take-Two with similar information for certain other companies the securities of which are publicly traded; reviewed the financial terms of certain recent business combinations in the interactive entertainment industry and in other industries; and performed such other studies and analyses, and considered such other factors, as we deemed appropriate.
For purposes of rendering this opinion, we have, with your consent, relied upon and assumed the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to,
D-2
