For your convenience, provided below is a brief summary of certain information contained in this joint proxy statement/prospectus. This summary highlights selected information from this joint proxy statement/prospectus and does not contain all of the information that may be important to you as a Take-Two stockholder or Zynga stockholder. To understand the combination fully and for a more complete description of the terms of the combination, you should read carefully this entire joint proxy statement/prospectus, its annexes and the other documents to which you are referred. Items in this summary include a page reference directing you to a more complete description of those items. You may obtain the information incorporated by reference in this joint proxy statement/prospectus, without charge, by following the instructions under “Where You Can Find More Information.”
The Parties to the Combination (Page 38)
Take-Two Interactive Software, Inc.
Headquartered in New York City, Take-Two is a leading developer, publisher, and marketer of interactive entertainment for consumers around the globe. Take-Two develops and publishes products principally through Rockstar Games, 2K, Private Division, and T2 Mobile Games. Take-Two’s products are designed for console systems, personal computers, and mobile, including smartphones and tablets, and are delivered through physical retail, digital download, online platforms, and cloud streaming services. Take-Two’s common stock is publicly traded on Nasdaq under the symbol “TTWO.” For more corporate and product information please visit Take-Two’s website at http://www.take2games.com. Take-Two’s principal executive offices are located at 110 West 44th Street, New York, New York 10036, and its telephone number is (646) 536-2842.
Zynga Inc.
Zynga is a global leader in interactive entertainment with a mission to connect the world through games. With massive global reach in more than 175 countries and regions, Zynga has a diverse portfolio of popular game franchises that have been downloaded more than four billion times on mobile including CSR Racing, Empires & Puzzles, FarmVille, Golf Rival, Hair Challenge, Harry Potter: Puzzles & Spells, High Heels!, Merge Dragons!, Merge Magic!, Toon Blast, Toy Blast, Words With Friends and Zynga Poker. With Chartboost, a leading mobile advertising and monetization platform, Zynga is an industry-leading next-generation platform with the ability to optimize programmatic advertising and yields at scale. Founded in 2007, Zynga is headquartered in California with locations in North America, Europe and Asia. For more information, visit www.zynga.com or follow Zynga on Twitter, Instagram, Facebook or the Zynga blog. Zynga’s principal executive offices are located at 699 Eighth Street, San Francisco, CA 94103, and its telephone number is (855) 449-9642.
Zebra MS I, Inc. and Zebra MS II, Inc.
Zebra MS I, Inc. and Zebra MS II, Inc. were each formed by Take-Two for the sole purpose of effecting the combination. Zebra MS I, Inc. and Zebra MS II, Inc. have not conducted any business and have no assets, liabilities or obligations of any nature other than as set forth in the merger agreement. By operation of the merger, Merger Sub 1 will be merged with and into Zynga, with Zynga continuing as the surviving corporation and as a wholly owned subsidiary of Take-Two, and the separate existence of Merger Sub 1 will cease. Immediately after the merger, by operation of the subsequent merger, the surviving corporation in the merger will be merged with and into Merger Sub 2, with Merger Sub 2 continuing as the surviving company and as a wholly owned subsidiary of Take-Two, and Merger Sub 2 will succeed to all of the property, rights, privileges, powers, franchises, debts, liabilities of the surviving corporation. Merger Sub 1’s and Merger Sub 2’s principal executive offices are located at 110 West 44th Street, New York, New York 10036, and their telephone number is (646) 536-2842.
The Combination and the Merger Agreement (Pages 61 and 118)
The terms and conditions of the combination are contained in the merger agreement, a copy of which is attached as Annex A hereto. Take-Two and Zynga encourage you to read the merger agreement carefully and in its entirety, as it is the legal document that governs the combination.
The merger agreement provides that, subject to the terms and conditions of the merger agreement, Merger Sub 1 will be merged with and into Zynga, with Zynga continuing as the surviving corporation, and as a wholly owned subsidiary of Take-Two. Immediately after the merger, the surviving corporation will be merged with and into Merger Sub 2, with Merger Sub 2 continuing as the surviving company, and as a wholly owned subsidiary of Take-Two.
Merger Consideration (Page 118)
At the effective time, each share of Zynga common stock that is outstanding immediately prior to the effective time will be converted into the right to receive (i) a number of shares of common stock, par value $0.01 per share, of Take-Two, which is referred to as “Take-Two common stock,” equal to the exchange ratio (as described below) with a cash payment in lieu of fractional shares of Take-Two common stock resulting from such calculation and (ii) $3.50 in cash, without interest and less any applicable withholding taxes. The “exchange ratio” is subject to a two-way collar mechanism and will be determined as follows: (i) if the Take-Two common stock price (as defined below) is an amount greater than $181.88, then the exchange ratio will be 0.0350; (ii) if the Take-Two common stock price is an amount greater than or equal to $156.50 but less than or equal to $181.88, then the exchange ratio will be an amount equal to the quotient (rounded to five decimal places) obtained by dividing (x) $6.36 by (y) the Take-Two common stock price; and (iii) if the Take-Two common stock price is less than $156.50, then the exchange ratio will be 0.0406. The “Take-Two common stock price” will be the volume-weighted average sales price per share of Take-Two common stock on the Nasdaq Global Select Market for the consecutive period beginning at 9:30 a.m. New York time on the twenty-third trading day immediately preceding the closing date of the combination and concluding at 4:00 p.m. New York time on the third trading day immediately preceding such closing date. Take-Two stockholders will continue to own their existing shares of Take-Two common stock.
As noted above, the number of shares of Take-Two common stock that Zynga stockholders will receive as consideration in the combination is not fixed and may change. The exchange ratio is not fixed within the two-way collar and will be adjusted for changes in the market price of Take-Two common stock prior to the effective time of the combination if the Take-Two common stock price is an amount equal to or between $156.50 and $181.88. In addition, the market value of the consideration payable to Zynga stockholders in the combination will fluctuate with the market price of Take-Two common stock if the Take-Two common stock price is an amount less than $156.50 or greater than $181.88. The Take-Two common stock price and the exchange ratio will not be determinable until the third trading day immediately preceding the closing date of the combination.
Treatment of Zynga Equity Awards (Page 137)
With respect to Zynga’s equity awards, the merger agreement provides that, at the effective time:
| • | each option to purchase Zynga common stock granted under any Zynga employee benefit plan, which is referred to as a “Zynga option,” that is outstanding and unexercised as of immediately prior to the effective time, whether or not then exercisable or vested, will be assumed by Take-Two and automatically converted into an option exercisable for shares of Take-Two common stock under the Take-Two equity plan, with the new number of shares underlying the options and exercise price determined after application of the equity award exchange ratio in accordance with the merger agreement. The “equity award exchange ratio” will equal the sum of |
| (i) the exchange ratio, and (ii) the quotient (rounded to four decimal places) obtained by dividing the cash consideration per share by the Take-Two common stock price (calculated as described under the section titled “The Merger Agreement”). As of such conversion, each converted option shall be subject to the same terms and conditions (including vesting and exercisability terms) applicable to the corresponding Zynga option immediately prior to the effective time except as otherwise provided in the merger agreement; |
| • | each Zynga restricted stock unit whose vesting is not conditioned in whole or in part on the satisfaction of performance criteria (including any awards previously granted subject to performance goals for which performance has been achieved, and remain subject to vesting based only on continued service), which is referred to as a “Zynga RSU Award,” that is outstanding immediately prior to the effective time, whether vested or unvested, will be assumed by Take-Two and automatically converted into a Take-Two restricted share unit award with respect to shares of Take-Two common stock under the Take-Two equity plan on the same terms and conditions as applied to the Zynga restricted stock unit as of immediately prior to the effective time, except as otherwise provided in the merger agreement, with the new number of shares underlying such award determined after application of the equity award exchange ratio in accordance with the merger agreement; and |
| • | each Zynga restricted stock unit whose vesting is conditioned in whole or in part on the satisfaction of performance criteria, which is referred to as a “Zynga PSU Award,” that is outstanding immediately prior to the effective time, whether vested or unvested (and provided that any such award that as of immediately prior to the effective time no longer is subject to performance criteria shall be subject to the treatment described in the immediately preceding paragraph above for Zynga RSU awards), will be assumed by Take-Two and automatically be converted into a Take-Two restricted share unit award with respect to shares of Take-Two common stock under the Take-Two equity plan on the same terms and conditions as applied to the Zynga performance share unit as of immediately prior to the effective time, with the new number of shares underlying such award determined after application of the equity award exchange ratio in accordance with the merger agreement. |
For more information, see the section titled “The Merger Agreement—Treatment of Zynga Equity Awards.”
Take-Two’s Reasons for the Combination and Recommendation of the Take-Two Board of Directors (Page 74)
The Take-Two board of directors unanimously recommends that you vote “FOR” the Take-Two share issuance proposal, “FOR” the Take-Two charter amendment proposal and “FOR” the Take-Two adjournment proposal. For a description of factors considered by the Take-Two board of directors in reaching its decision to approve the merger agreement and the transactions contemplated thereby, including the combination, the share issuance and the charter amendment, and additional information on the recommendation of the Take-Two board of directors, see the section titled “The Combination—Take-Two’s Reasons for the Combination and Recommendation of the Take-Two Board of Directors.”
Zynga’s Reasons for the Combination and Recommendation of the Zynga Board of Directors (Page 79)
The Zynga board of directors unanimously recommends that you vote “FOR” the Zynga merger proposal, “FOR” the Zynga compensation proposal and “FOR” the Zynga adjournment proposal. For a description of factors considered by the Zynga board of directors in reaching its decision to approve the merger agreement and the transactions contemplated thereby, including the combination, and additional information on the recommendation of the Zynga board of directors, see the section titled “The Combination—Zynga’s Reasons for the Combination and Recommendation of the Zynga Board of Directors.”
Opinions of Take-Two’s Financial Advisors
Opinion of J.P. Morgan Securities LLC (Page 84; Annex B)
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 combination 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.
The full text of the written opinion of J.P. Morgan, dated January 9, 2022, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached to this joint proxy statement/prospectus as Annex B. The summary of J.P. Morgan’s opinion contained in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of J.P. Morgan’s written opinion. J.P. Morgan provided advisory services and its opinion for the information and assistance of the Take-Two board of directors in connection with its consideration of the transaction contemplated by the merger agreement. The J.P. Morgan opinion is not a recommendation as to how any holder of Take-Two common stock should vote with respect to the transaction contemplated by the merger agreement or any other matter.
For additional information, see the section titled “The Combination—Opinions of Take-Two’s Financial Advisors—Opinion of J.P. Morgan Securities, LLC” and the full text of the written opinion of J.P. Morgan attached as Annex B to this joint proxy statement/prospectus.
Opinion of LionTree Advisors LLC (Page 87; Annex C)
The Take-Two board of directors retained LionTree to act as a financial advisor to the Take-Two board of directors in connection with the combination. On January 9, 2022 at a meeting of the Take-Two board of directors held to evaluate the combination, LionTree rendered its oral opinion to the Take-Two board of directors (which was subsequently confirmed in writing by delivery of LionTree’s written opinion dated January 9, 2022 addressed to the Take-Two Board of directors) that, as of such date, the merger consideration to be paid by Take-Two pursuant to the merger agreement was fair, from a financial point of view, to Take-Two, based upon and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken, and other matters considered by LionTree in preparing its opinion.
LionTree’s opinion was provided to the Take-Two board of directors and only addressed the fairness, from a financial point of view, of the merger consideration to be paid by Take-Two pursuant to the merger agreement. The summary of LionTree’s opinion in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of its written opinion, which is included as Annex C to this joint proxy statement/prospectus and incorporated herein by reference, and sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken, and other matters considered by LionTree in preparing its opinion. However, neither LionTree’s opinion nor the summary of its opinion and the related analyses set forth in this joint proxy statement/prospectus constitute a recommendation to any holder of Take-Two common stock as to how such stockholder should vote or act on any matter relating to the merger or any other matter.
The full text of the written opinion of LionTree, dated January 9, 2022, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached to this joint proxy statement/prospectus as Annex C. The summary of LionTree’s opinion contained in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of LionTree’s written opinion. LionTree provided advisory services and its opinion for the information and assistance of the Take-Two board of directors in connection with its consideration of the transaction contemplated by the merger agreement. The LionTree opinion is not a recommendation as to how any holder of Take-Two common stock should vote with respect to the transaction contemplated by the merger agreement or any other matter.
For additional information, see the section titled “The Combination—Opinions of Take-Two’s Financial Advisors—Opinion of LionTree Advisors, LLC” and the full text of the written opinion of LionTree attached as Annex C to this joint proxy statement/prospectus.
Opinion of Zynga’s Financial Advisor
Opinion of Goldman Sachs & Co. LLC (Page 96; Annex D)
At a meeting of the Zynga board of directors held on January 9, 2022, Goldman Sachs rendered its oral opinion, subsequently confirmed by delivery of its written opinion, dated January 9, 2022, to the Zynga board of directors that, as of the date of the written opinion and based upon and subject to the factors and assumptions set forth therein, the merger consideration to be paid to the holders (other than Take-Two and its affiliates) of shares of Zynga common stock pursuant to the merger agreement was fair from a financial point of view to such holders.
The full text of the written opinion of Goldman Sachs, dated January 9, 2022, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex D. Goldman Sachs provided advisory services and its opinion for the information and assistance of the Zynga board of directors in connection with its consideration of the transactions contemplated by the merger agreement. The Goldman Sachs opinion is not a recommendation as to how any holder of Zynga common stock should vote with respect to such transactions or any other matter.
For additional information, see the section titled “The Combination—Opinion of Zynga’s Financial Advisor” and the full text of the written opinion of Goldman Sachs attached as Annex D to this joint proxy statement/prospectus.
The Take-Two Special Meeting (Page 39)
The Take-Two special meeting will be held in a virtual meeting format via live, audio-only webcast on May 19, 2022, beginning at 11:00 a.m., Eastern Time. Take-Two stockholders will be able to virtually attend and vote at the Take-Two special meeting by visiting the Take-Two special meeting website at www.virtualshareholdermeeting.com/TTWO2022SM.
The purposes of the Take-Two special meeting are as follows:
| • | Take-Two Proposal 1: Approval of the Share Issuance. To consider and vote on the Take-Two share issuance proposal; |
| • | Take-Two Proposal 2: Approval of the Charter Amendment. To consider and vote on the Take-Two charter amendment proposal; and |
| • | Take-Two Proposal 3: Adjournment of the Take-Two Special Meeting. To consider and vote on the Take-Two adjournment proposal. |
Approval of the Take-Two share issuance proposal and the Take-Two charter amendment proposal by Take-Two stockholders are conditions to the combination. Approval of the Take-Two adjournment proposal is not a condition to the obligation of either Take-Two or Zynga to complete the combination.
Only holders of record of shares of Take-Two common stock outstanding at the close of business on April 4, 2022, the Take-Two record date, are entitled to notice of, and to vote at, the Take-Two special meeting or any adjournment or postponement thereof. Each Take-Two stockholder is entitled to one vote on each proposal for each share of Take-Two common stock held of record at the close of business on the Take-Two record date.
A quorum of Take-Two stockholders is necessary to conduct business at the Take-Two special meeting. The presence in person or by proxy of the holders of a majority of the issued and outstanding shares of Take-Two common stock entitled to vote at the Take-Two special meeting will constitute a quorum. Virtual attendance at the Take-Two special meeting will constitute presence in person for the purpose of determining the presence of a quorum for the transaction of business at the Take-Two special meeting. Abstentions will count as votes present and entitled to vote for the purpose of determining the presence of a quorum for the transaction of business at the Take-Two special meeting. Since all of the proposals for consideration at the Take-Two special meeting are considered “non-routine” matters, shares held in “street name” will not be counted as present for the purpose of determining the existence of a quorum unless the Take-Two stockholder provides their bank, broker or other nominee with voting instructions for at least one of the proposals brought before the Take-Two special meeting.
Take-Two Proposal 1: Take-Two Share Issuance Proposal
Assuming a quorum is present at the Take-Two special meeting, approval of the Take-Two share issuance proposal requires the affirmative vote of a majority of votes cast on the Take-Two share issuance proposal as well as the affirmative vote of the holders of a majority of the stock having voting power present in person or represented by proxy at the Take-Two special meeting. Any shares not present or represented by proxy (including due to the failure of a Take-Two stockholder who holds shares in “street name” through a bank, broker or other nominee to provide voting instructions with respect to any proposals at the Take-Two special meeting to such bank, broker or other nominee) will have no effect on the outcome of the Take-Two share issuance proposal, provided that a quorum is otherwise present. An abstention or other failure of any shares present or represented by proxy to vote on the Take-Two share issuance proposal will have the same effect as a vote “AGAINST” the Take-Two share issuance proposal for purposes of the requirement that the Take-Two share issuance proposal receive the affirmative vote of the holders of a majority of the Take-Two common stock having voting power present in person or represented by proxy at the Take-Two special meeting. In addition, if a Take-Two stockholder who holds shares in “street name” through a bank, broker or other nominee provides voting instructions for one or more other proposals, but not for the Take-Two share issuance proposal, it will have the same effect as a vote “AGAINST” the Take-Two share issuance proposal.
Take-Two Proposal 2: Take-Two Charter Amendment Proposal
Assuming a quorum is present at the Take-Two special meeting, approval of the Take-Two charter amendment proposal requires the affirmative vote of the holders of Take-Two common stock representing at least a majority of the outstanding shares of Take-Two common stock entitled to vote thereon. If you are a Take-Two stockholder and fail to vote, fail to instruct your bank, broker or other nominee to vote with respect to the Take-Two charter amendment proposal, or abstain from voting, it will have the same effect as a vote “AGAINST” the Take-Two charter amendment proposal.
Take-Two Proposal 3: Take-Two Adjournment Proposal
Assuming a quorum is present at the Take-Two special meeting, approval of the Take-Two adjournment proposal requires the affirmative vote of the holders of a majority of the Take-Two common stock having voting power present in person or represented by proxy at the Take-Two special meeting. Any shares not present or represented by proxy (including due to the failure of a Take-Two stockholder who holds shares in “street name” through a bank, broker or other nominee to provide voting instructions with respect to any proposals at the Take-Two special meeting to such bank, broker or other nominee) will have no effect on the outcome of the Take-Two adjournment proposal. An abstention or other failure of any shares present or represented by proxy to vote on the Take-Two share issuance proposal will have the same effect as a vote “AGAINST” the Take-Two adjournment proposal, provided that a quorum is otherwise present at the Take-Two special meeting. In addition, if a Take-Two stockholder who holds shares in “street name” through a bank, broker or other nominee provides voting instructions for one or more other proposals, but not for the Take-Two adjournment proposal, it will have the same effect as a vote “AGAINST” the Take-Two adjournment proposal.
The Zynga Special Meeting (Page 50)
The Zynga special meeting will be held virtually via live webcast on May 19, 2022, beginning at 8:00 a.m., Pacific Time. Zynga stockholders will be able to virtually attend and vote at the Zynga special meeting by visiting the Zynga special meeting website at https://web.lumiagm.com/287175525, password: zynga2022 (case sensitive).
The purposes of the Zynga special meeting are as follows:
| • | Zynga Proposal 1: Adoption of the Merger Agreement. To consider and vote on the Zynga merger proposal; |
| • | Zynga Proposal 2: Approval, on an Advisory Non-Binding Basis, of Certain Merger-Related Compensatory Arrangements with Zynga Named Executive Officers. To consider and vote on the Zynga compensation proposal; and |
| • | Zynga Proposal 3: Adjournment of the Zynga Special Meeting. To consider and vote on the Zynga adjournment proposal. |
Approval of the Zynga merger proposal by Zynga stockholders is a condition to the combination. Approval of the advisory Zynga compensation proposal and the Zynga adjournment proposal are not conditions to the obligation of either Take-Two or Zynga to complete the combination.
Only holders of record of shares of Zynga common stock outstanding at the close of business on April 4, 2022, the Zynga record date, are entitled to notice of, and to vote at, the Zynga special meeting or any adjournment or postponement thereof. Each Zynga stockholder is entitled to one vote on each proposal for each share of Zynga common stock held of record at the close of business on the Zynga record date.
A quorum of Zynga stockholders is necessary to conduct business at the Zynga special meeting. The presence in person or by proxy of the holders of a majority of the voting power of the issued and outstanding shares of Zynga
common stock entitled to vote at the Zynga special meeting will constitute a quorum. Virtual attendance at the Zynga special meeting will constitute presence in person for the purpose of determining the presence of a quorum for the transaction of business at the Zynga special meeting. Abstentions will count as votes present and entitled to vote for the purpose of determining the presence of a quorum for the transaction of business at the Zynga special meeting. Since all of the proposals for consideration at the Zynga special meeting are considered “non-routine” matters, shares held in “street name” will not be counted as present for the purpose of determining the existence of a quorum unless the Zynga stockholder provides their bank, broker or other nominee with voting instructions for at least one of the proposals brought before the Zynga special meeting.
Zynga Proposal 1: Zynga Merger Proposal
Assuming a quorum is present at the Zynga special meeting, approval of the Zynga merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Zynga common stock entitled to vote thereon at the close of business on the Zynga record date. If you are a Zynga stockholder and fail to vote, fail to instruct your bank, broker or other nominee to vote with respect to the Zynga merger proposal, or abstain from voting, it will have the same effect as a vote “AGAINST” the Zynga merger proposal.
Zynga Proposal 2: Zynga Compensation Proposal
Assuming a quorum is present at the Zynga special meeting, approval of the Zynga compensation proposal requires the affirmative vote of a majority of the voting power of the Zynga common stock present, including by remote communication, or represented by proxy at the meeting and entitled to vote thereon. Any shares not present or represented by proxy (including due to the failure of a Zynga stockholder who holds shares in “street name” through a bank, broker or other nominee to provide voting instructions with respect to any proposals at the Zynga special meeting to such bank, broker or other nominee) will have no effect on the outcome of the Zynga compensation proposal, provided that a quorum is otherwise present. An abstention or other failure of any shares present or represented by proxy to vote on the Zynga compensation proposal will have the same effect as a vote “AGAINST” the Zynga compensation proposal. In addition, if a Zynga stockholder who holds shares in “street name” through a bank, broker or other nominee provides voting instructions for one or more other proposals, but not for the Zynga compensation proposal, it will have the same effect as a vote “AGAINST” the Zynga compensation proposal.
Zynga Proposal 3: Zynga Adjournment Proposal
Assuming a quorum is present at the Zynga special meeting, approval of the Zynga adjournment proposal requires the affirmative vote of a majority of voting power of the Zynga common stock present, including by remote communication, or represented by proxy at the meeting and entitled to vote thereon. Any shares not present or represented by proxy (including due to the failure of a Zynga stockholder who holds shares in “street name” through a bank, broker or other nominee to provide voting instructions with respect to any proposals at the Zynga special meeting to such bank, broker or other nominee) will have no effect on the outcome of the Zynga adjournment proposal, provided that a quorum is otherwise present. An abstention or other failure of any shares present or represented by proxy to vote on the Zynga adjournment proposal will have the same effect as a vote “AGAINST” the Zynga adjournment proposal. In addition, if a Zynga stockholder who holds shares in “street name” through a bank, broker or other nominee provides voting instructions for one or more other proposals, but not for the Zynga adjournment proposal, it will have the same effect as a vote “AGAINST” the Zynga adjournment proposal.
Interests of Take-Two Directors and Executive Officers in the Combination (Page 171)
Other than with respect to continued service for, employment by and/or the right to continued indemnification by the combined company, as of the date of this joint proxy statement/prospectus, Take-Two directors and executive
officers do not have interests in the combination that are different from, or in addition to, the interests of other Take-Two stockholders generally. See the section titled “Interests of Take-Two Directors and Executive Officers in the Combination.”
Interests of Zynga Directors and Executive Officers in the Combination (Page 172)
In considering the recommendations of the Zynga board of directors, Zynga stockholders should be aware that Zynga directors and executive officers may have interests in the combination, including financial interests, which may be different from, or in addition to, the interests of Zynga stockholders generally. The Zynga board of directors was aware of and considered these interests, among other matters, in reaching its determination that the combination is fair to and in the best interests of Zynga and its stockholders, approving and declaring advisable the merger agreement and the transactions contemplated thereby, including the combination, and recommending that Zynga stockholders approve the Zynga merger proposal. These interests are discussed in more detail in the section titled “Interests of Zynga Directors and Executive Officers in the Combination.”
The benefits and financial interests that Zynga’s directors and executive officers may become eligible to receive as a result of their interests in the combination include:
| • | Zynga equity awards, including Zynga options, Zynga RSUs and Zynga PSUs held by Zynga executive officers will be assumed by Take-Two and converted into Take-Two equity awards under the Take-Two equity plan, the number and estimated value of which are provided in the section titled “Interests of Zynga Directors and Executive Officers in the Combination;” |
| • | each of Zynga’s current executive officers has entered into an offer letter with Zynga and/or is a participant in the Zynga Inc. Change in Control Severance Benefit Plan, which, among other things, provide for certain benefits in the event of a termination of employment under qualifying circumstances in connection with a change in control of Zynga; |
| • | the merger agreement provides that the directors and executive officers of Zynga and its subsidiaries will have the right to indemnification and continued coverage under directors’ and officers’ liability insurance policies following the combination; and |
| • | Take-Two has agreed to appoint, on or prior to the effective time, two members of the Zynga board of directors, selected by Zynga and approved by Take-Two, to the Take-Two of board of directors. |
For an estimate of the value of the benefits and financial interests that Zynga’s named executive officers may become eligible to receive as a result of their interests in the combination, assuming, among other things, that the combination was completed on May 31, 2022 and each such named executive officer experienced a qualifying termination of employment immediately thereafter, see the section titled “Interests of Zynga Directors and Executive Officers in the Combination–Quantification of Payments and Benefits to Zynga Named Executive Officers–Golden Parachute Compensation.”
Certain Beneficial Owners of Take-Two Common Stock (Page 212)
At the close of business on March 31, 2022, the latest practicable date prior to the date of this joint proxy statement/ prospectus, Take-Two directors and executive officers and their affiliates, as a group, owned and were entitled to vote less than 1% of the shares of Take-Two common stock, including the shares covered by the voting agreement described below and entered into by and among Take-Two’s executive officers and directors (and certain of their respective affiliates), solely in their capacity as stockholders of Take-Two (the “Take-Two voting agreement”). For more information regarding the Take-Two voting agreement, see the section titled “Voting Agreements.”
Pursuant to the voting agreement, Take-Two currently expects that all Take-Two directors and executive officers will vote their shares “FOR” the Take-Two share issuance proposal, “FOR” the Take-two charter amendment proposal and “FOR” the Take-Two adjournment proposal. For more information regarding the security ownership of Take-Two directors and executive officers, see the section titled “Certain Beneficial Owners of Take-Two Common Stock.”
Certain Beneficial Owners of Zynga Common Stock (Page 214)
At the close of business on March 31, 2022, the latest practicable date prior to the date of this joint proxy statement/ prospectus, Zynga directors and executive officers and their affiliates, as a group, beneficially owned approximately 7.0% of the shares of Zynga common stock, including the shares covered by the voting agreements described below and entered into by and among Zynga’s executive officers and directors (and certain of their respective affiliates), solely in their capacity as stockholders of Zynga (the “Zynga voting agreements”). For more information regarding the Zynga voting agreements, see the section titled “Voting Agreements.”
Zynga currently expects that all Zynga directors and executive officers will vote their shares “FOR” the Zynga merger proposal, “FOR” the Zynga compensation proposal and “FOR” the Zynga adjournment proposal. For more information regarding the security ownership of Zynga directors and executive officers, see the section titled “Certain Beneficial Owners of Zynga Common Stock.”
Governance Matters After the Combination (Page 115)
Pursuant to the merger agreement, Take-Two has agreed to appoint, on or prior to the effective time, two members of the Zynga board of directors, selected by Zynga and approved by Take-Two, to the Take-Two of board of directors. The two members of the Zynga board of directors selected by Zynga for appointment to the Take-Two board of directors pursuant to this provision of the merger agreement are Ellen Siminoff and William “Bing” Gordon. The appointment of Ms. Siminoff and Mr. Gordon remain subject to the review and approval by Take-Two’s Corporate Governance Committee and Board of Directors prior to the effective time. For more information, see the section titled “The Combination—Governance Matters After the Combination.”
Regulatory Approvals and Related Matters (Page 115)
The obligations of Take-Two and Zynga to consummate the combination are subject to, among other conditions, the expiration or earlier termination of any waiting period (and any extension thereof) under the HSR Act and the consent, waiver, authorization or approval of the applicable antitrust regulatory authority in certain specified non-U.S. jurisdictions. Take-Two and Zynga filed the notifications required under the HSR Act with the Premerger Notification Office of the Federal Trade Commission and the Antitrust Division of the Department of Justice on January 24, 2022. The applicable waiting period under the HSR Act expired at 11:59 p.m. Eastern Time on February 23, 2022. All required antitrust approvals have been obtained as of the date of this joint proxy statement/prospectus.
Under the merger agreement, each of Take-Two and Zynga has agreed to use their respective reasonable best efforts, subject to certain limitations, to take, or cause to be taken, all actions necessary to complete the combination and make effective the other contemplated as soon as practicable after the date of the merger agreement, including to receive all required regulatory approvals so as to complete the combination and the other contemplated transactions expeditiously (but in no event later than January 9, 2023). For more information, see the section titled “The Combination—Regulatory Approvals and Related Matters.”
Under the DGCL, holders of Zynga common stock who deliver to Zynga a written demand for appraisal before the vote on the adoption of the merger agreement at the Zynga special meeting and who do not vote for the
adoption and approval of the merger agreement and to approve the combination have the right to seek appraisal of the fair value of their shares as determined by the Delaware Court of Chancery if the combination is completed and if certain conditions are met, but only if they comply with all requirements of Delaware law, as described under “Appraisal Rights” below, beginning on page 206 which detailed description is qualified by reference to the full text of Section 262 of the DGCL as attached as Annex G hereto. This appraisal amount could be more than, the same as, or less than the amount a Zynga stockholder would be entitled to receive under the merger agreement. Any holder of Zynga common stock intending to exercise appraisal rights must, among other things, submit a written demand for appraisal to Zynga prior to the vote on the adoption and approval of the merger agreement and the transactions contemplated thereunder, not vote or otherwise submit a proxy in favor of adoption and approval of the merger agreement and the transactions contemplated thereunder and not submit a letter of transmittal. Failure to follow exactly the procedures specified under Delaware law may result in the loss of appraisal rights. See the section titled “Appraisal Rights.” Information about how Zynga stockholders may vote on the proposals being considered in connection with the Combination can be found in the section titled “The Zynga Special Meeting.”
The stockholders of Take-Two are not entitled to appraisal of their shares or dissenters’ rights with respect to the merger in connection with the combination under Delaware law.
Conditions to the Completion of the Combination (Page 140)
The obligations of each of Take-Two and Zynga to complete the combination are subject to the satisfaction or waiver (to the extent permitted by applicable legal requirements), at or prior to the completion of the combination, of each of the following conditions:
| • | the registration statement of which this joint proxy statement/prospectus is a part being declared effective in accordance with the provisions of the Securities Act, no stop order suspending its effectiveness being issued by the SEC and in effect and there being no proceedings for that purpose having been initiated; |
| • | shares of Take-Two common stock to be issued in the combination having been approved for listing (subject to official notice of issuance) on the Nasdaq; |
| • | the merger agreement being duly adopted by the required Zynga stockholder vote; |
| • | the Take-Two share issuance proposal and the Take-Two charter amendment each being duly approved by the required Take-Two stockholder vote; |
| • | the expiration or earlier termination of any applicable waiting period (and any extension thereof) under the HSR Act; |
| • | the antitrust approvals that are required pursuant to the laws of certain specified non-U.S. jurisdictions; and |
| • | the absence of any statute, regulation, order or injunction having the effect of preventing or materially impairing the consummation of the merger. |
In addition, each party’s obligation to complete the combination is subject to, among other things, the accuracy of certain representations and warranties of the other party and the compliance by such other party with certain of its covenants, in each case, subject to the materiality standards set forth in the merger agreement, and the absence of the occurrence of any material adverse effect on the other party.
Neither Take-Two nor Zynga can be certain when, or if, the conditions to the combination will be satisfied or waived, or that the combination will be completed.
Zynga Go-Shop Period (Page 125)
Under the merger agreement, until the expiration of the go-shop period at 11:59 p.m. (New York time) on February 24, 2022, which is referred to as the “go-shop period”, Zynga, its subsidiaries and affiliates, and its and their respective representatives, had the right to, among other things, (i) solicit, initiate, propose, induce the making or submission of, encourage or facilitate in any way any offer, inquiry or proposal that constitutes, or could reasonably be expected to lead to, a Zynga alternative acquisition proposal, including by (a) providing any nonpublic information relating to Zynga, its subsidiaries or their respective businesses, properties or assets and (b) providing access in connection therewith to Zynga personnel, in each case, to any third party that has executed a Zynga acceptable confidentiality agreement (as defined under “The Merger Agreement—Go-Shop Period; Restrictions on Solicitations of Other Offers”); and (ii) enter into or continue discussions with third parties in connection therewith, and cooperate with or assist or participate in, or facilitate in any way, any inquiries, offers, proposals, discussions or negotiations or any effort or attempt to make any Zynga alternative acquisition proposal or other proposals that could reasonably be expected to lead to a Zynga alternative acquisition proposal, including by granting a waiver, amendment or release under any pre-existing “standstill,” “confidentiality” or other similar provision to the extent necessary to allow for a Zynga alternative acquisition proposal or amendment to a Zynga alternative acquisition proposal to be made to Zynga or the Zynga board of directors. If as a result of its activities during the go-shop period, Zynga provided to any third parties access in writing to nonpublic information that was not previously made available to Take-Two, Zynga is required to provide such information to Take-Two promptly following such provision to any third parties.
Zynga No-Shop Period (Page 125)
Under the merger agreement, commencing at 12:01 a.m. (New York time) on February 25, 2022, which is referred to as the “Zynga no-shop period start date”, until the earlier of the effective time and the date, if any, on which the merger agreement is terminated, subject to certain exceptions, Zynga may not, and must cause its subsidiaries and its directors and officers not to, and must not authorize or permit its other representatives to, subject to limited exceptions set forth in the merger agreement:
| • | solicit, initiate, propose, induce the making or submission of, or knowingly encourage or facilitate in any way any offer, inquiry or proposal that constitutes, or could reasonably be expected to lead to, a Zynga alternative acquisition proposal; |
| • | continue, enter into, engage in or otherwise participate in any discussions or negotiations with any person regarding any Zynga alternative acquisition proposal; or |
| • | grant any waiver, amendment or release of any third party under any standstill or confidentiality provision in connection with the preceding bullets. |
In the merger agreement, Zynga agreed that at the Zynga no-shop period start date, Zynga would, and cause its subsidiaries and its directors and officers to, and not permit or authorize its other representatives to fail to, immediately cease any and all existing activities, discussions or negotiations with any parties previously conducted with respect to any Zynga alternative acquisition proposal, other than with any excluded party (as defined under “The Merger Agreement—Go-Shop Period; Restrictions on Solicitations of Other Offers”).
Take-Two No-Shop Period (Page 126)
Under the merger agreement, commencing on the date of the merger agreement and until the earlier of the effective time and the date, if any, on which the merger agreement is terminated, subject to certain exceptions,
Take-Two may not, and must cause its subsidiaries and its directors and officers not to, and must not authorize or permit its other representatives to, subject to limited exceptions set forth in the merger agreement:
| • | solicit, initiate, propose, induce the making or submission of, or knowingly encourage or facilitate in any way any offer, inquiry or proposal that constitutes, or could reasonably be expected to lead to, a Take-Two alternative acquisition proposal; |
| • | continue, enter into, engage in or otherwise participate in any discussions or negotiations with any person regarding any Take-Two alternative acquisition proposal; or |
| • | grant any waiver, amendment or release of any third party under any standstill or confidentiality provision in connection with the preceding bullets. |
In the merger agreement, Take-Two agreed that at the Take-Two no-shop period start date, Take-Two would, and cause its subsidiaries and its directors and officers to, and not permit or authorize its other representatives to fail to, immediately cease any and all existing activities, discussions or negotiations with any parties previously conducted with respect to any Take-Two alternative acquisition proposal.
Zynga Change in Recommendation (Page 130)
Under the merger agreement, except as described below, the Zynga board of directors may not:
| • | withdraw (or qualify, amend or modify in any manner adverse to Take-Two), or propose publicly to withdraw (or qualify, amend or modify in any manner adverse to Take-Two), its recommendation that the stockholders of Zynga vote in favor of the approval of the combination; |
| • | approve, recommend or declare advisable any Zynga alternative acquisition proposal; |
| • | fail to recommend against acceptance of a tender offer or exchange offer that is a Zynga alternative acquisition proposal; or |
| • | refuse to affirm publicly the Zynga recommendation following a reasonable written request by Take-Two to provide such reaffirmation, provided, that the Zynga board of directors will not be required to affirm the recommendation made more than once per Zynga alternative acquisition proposal or material modification of such Zynga alternative acquisition proposal (any such action described in the preceding bullets, a “Zynga change of recommendation”). |
At any time prior to obtaining the required Zynga vote, the Zynga board of directors may, subject to advance notice and negotiation obligations in favor of Take-Two set forth in the merger agreement:
| • | effect a Zynga change of recommendation following a bona fide written Zynga alternative acquisition proposal that did not result from or arise out of a material breach by Zynga of the “no-shop” provisions under the merger agreement and which the Zynga board of directors determines in good faith, in consultation with its financial advisors and outside legal counsel, is a Zynga superior proposal, and that the failure to take such action would be inconsistent with its fiduciary duties under applicable law; |
| • | following receipt of a bona fide written Zynga alternative acquisition proposal which the Zynga board of directors determines in good faith, in consultation with its financial advisors and outside legal counsel, is a Zynga superior proposal, terminate the merger agreement for the purpose of entering into an alternative acquisition agreement with respect to such Zynga superior proposal, if the Zynga board of directors has determined in good faith, after consultation with its financial advisors and outside legal counsel, that the failure to take such action would be inconsistent with its fiduciary duties under applicable law and, concurrently with entering into such alternative acquisition agreement, Zynga terminates the merger agreement and pays the applicable termination fee, as described in the section entitled “The Merger Agreement—Termination Fees and Expenses; Liability for Breach”; or |
| • | effect a Zynga change of recommendation in response to a Zynga intervening event if the Zynga board of directors determines in good faith, in consultation with its financial advisors and outside legal counsel, that the failure to effect a Zynga change of recommendation would be inconsistent with its fiduciary duties under applicable law. |
Under the merger agreement, the following actions shall not (in and of themselves) constitute a Zynga change of recommendation, or otherwise constitute a basis for Take-Two, Merger Sub 1 or Merger Sub 2 to terminate the merger agreement:
| • | a determination by the Zynga board of directors that a Zynga alternative acquisition proposal constitutes, or would reasonably be expected to result in a Zynga superior proposal; |
| • | the delivery, in and of itself, of a notice of a Zynga change of recommendation to Take-Two; |
| • | any public disclosure of the actions described in the preceding bullets required by applicable law, so long as any such disclosure includes an express reaffirmation of the Zynga recommendation; or |
| • | or the making, in and of itself, of a customary “stop, look and listen” communication to Zynga’s stockholders pursuant to Rule 14d-9(f) promulgated under the Exchange Act. |
The merger agreement does not restrict Zynga or the Zynga board of directors from complying with its disclosure obligations under applicable law or rules and policies of the NASDAQ with regard to any Zynga alternative acquisition proposal, including taking and disclosing to its stockholders a position contemplated by Rule 14d-9 or Rule 14e-2(a) or Item 1012(a) of Regulation M-A under the Exchange Act (or any similar communication to stockholders).
Take-Two Change in Recommendation (Page 131)
Under the merger agreement, except as described below, the Take-Two board of directors may not:
| • | withdraw (or qualify, amend or modify in any manner adverse to Zynga), or propose publicly to withdraw (or qualify, amend or modify in any manner adverse to Zynga), its recommendation that the stockholders of Take-Two vote in favor of the approval of the combination; |
| • | approve, recommend or declare advisable any Take-Two alternative acquisition proposal; |
| • | fail to recommend against acceptance of a tender offer or exchange offer that is a Take-Two alternative acquisition proposal; or |
| • | refuse to affirm publicly the Take-Two Recommendation following a reasonable written request by Zynga to provide such reaffirmation, provided, that the Take-Two board of directors will not be required to affirm the recommendation made more than once per Take-Two alternative acquisition proposal or material modification of such Take-Two alternative acquisition proposal (any such action described in the preceding bullets, a “Take-Two change of recommendation”). |
At any time prior to obtaining the required Take-Two vote, the Take-Two board of directors may, subject to advance notice and negotiation obligations in favor of Take-Two set forth in the merger agreement:
| • | effect a Take-Two change of recommendation following a bona fide written Take-Two alternative acquisition proposal that did not result from or arise out of a material breach by Take-Two of the “no-shop” provisions under the merger agreement and which the Take-Two board of directors determines in good faith, in consultation with its financial advisors and outside legal counsel, is a Take-Two superior proposal, and that the failure to take such action would be inconsistent with its fiduciary duties under applicable law; or |
| • | effect a Take-Two change of recommendation in response to a Take-Two intervening event if the Take-Two board of directors determines in good faith, in consultation with its financial advisors and outside legal counsel, that the failure to effect a Take-Two change of recommendation would be inconsistent with its fiduciary duties under applicable law. |
Under the merger agreement, the following actions shall not (in and of themselves) constitute a Take-Two change of recommendation, or otherwise constitute a basis for Zynga to terminate the merger agreement:
| • | a determination by the Take-Two board of directors that a Take-Two alternative acquisition proposal constitutes, or would reasonably be expected to result in a Take-Two superior proposal; |
| • | the delivery, in and of itself, of a notice of a Take-Two change of recommendation to Zynga; |
| • | any public disclosure of the actions described in the preceding bullets required by applicable law, so long as any such disclosure includes an express reaffirmation of the Take-Two recommendation; or |
| • | the making, in and of itself, of a customary “stop, look and listen” communication to Take-Two’s stockholders pursuant to Rule 14d-9(f) promulgated under the Exchange Act. |
The merger agreement does not restrict Take-Two or the Take-Two board of directors from complying with its disclosure obligations under applicable law or rules and policies of the NASDAQ with regard to any Take-Two alternative acquisition proposal, including taking and disclosing to its stockholders a position contemplated by Rule 14d-9 or Rule 14e-2(a) or Item 1012(a) of Regulation M-A under the Exchange Act (or any similar communication to stockholders).
Termination of the Merger Agreement (Page 142)
The merger agreement may be terminated and the combination abandoned at any time prior to the effective time, and, except as described below, whether before or after the receipt of the required stockholder approvals, under the following circumstances:
| • | by mutual written consent of Zynga and Take-Two; |
| • | by either Zynga or Take-Two: |
| • | if the combination is not consummated before the twelve (12) month anniversary of the date the merger agreement, which is January 9, 2023 and referred to as the “end date”; provided, however, that this right to terminate the merger agreement will not be available to any party whose breach of any provision of the merger agreement has been the primary cause of the failure to close by the end date; |
| • | if any governmental entity issues a final and non-appealable order, decree or ruling or takes any other action that has the effect of permanently restraining, enjoining or otherwise prohibiting or making illegal the consummation of the combination or any other transaction contemplated by the merger agreement, provided, that the party seeking to terminate pursuant to this right used its reasonable best efforts to remove such restraint or prohibition; and that this right to terminate the merger agreement will not be available to any party whose breach of any provision of the merger agreement results in the imposition of such order, decree or ruling or the failure of such order, decree or ruling to be resisted, resolved or lifted; |
| • | if the required Zynga vote and/or the required Take-Two vote (each as defined under “The Merger Agreement—Go-Shop Period; Restrictions on Solicitations of Other Offers”) is not obtained; provided, however, that this right to terminate the merger agreement will not be available to any party whose breach of certain provisions of the merger agreement relating to the preparation and filing of this joint proxy statement/prospectus resulted in the failure of the applicable requisite vote to be obtained; |
| • | by Take-Two: |
| • | prior to the Zynga special meeting, if (i) there shall have been a Zynga change of recommendation or the Zynga board of directors shall have approved or recommended a Zynga superior proposal (or the Zynga board of directors resolves to do any of the foregoing), (ii) Zynga or any of its subsidiaries shall have entered into any definitive acquisition agreement, merger agreement or similar definitive agreement to consummate a Zynga alternative acquisition proposal, whether or not permitted by the merger agreement or (iii) Zynga is in intentional breach of any of its material obligations under the merger agreement regarding third-party acquisition proposals as described under the section titled “The Merger Agreement—Go-Shop Period; Restrictions on Solicitations of Other Offers”; |
| • | upon a breach of any representation, warranty, covenant or agreement on the part of Zynga contained in the merger agreement such that the relevant conditions to Take-Two’s obligations to complete the combination would not be satisfied and that either (i) the breach is not reasonably capable of being cured or (ii) if such breach is reasonably capable of being cured, such breach has not been cured prior to the earlier of (a) thirty (30) days following notice of such breach or (b) the end date. However, Take-Two does not have this right to terminate the merger agreement if it is then in material breach of any of its representations, warranties, covenants or agreements contained in the merger agreement; |
| • | by Zynga: |
| • | prior to receipt of the required Zynga vote, if the Zynga board of directors shall have authorized Zynga to enter into an alternative acquisition agreement with respect to a Zynga superior proposal; provided that, substantially concurrently with and as a condition to such termination, Zynga enters into such alternative acquisition agreement and pays (or causes to be paid) to Take-Two the termination fee (and reimbursement for expenses of enforcing the right to receive the termination fee); |
| • | upon a breach of any representation, warranty, covenant or agreement on the part of Take-Two, Merger Sub 1 or Merger Sub 2 contained in the merger agreement such that the relevant conditions to Zynga’s obligations to complete the combination would not be satisfied and that either (i) the breach is not reasonably capable of being cured or (ii) if such breach is reasonably capable of being cured, such breach has not been cured prior to the earlier of (a) thirty (30) days following notice of such breach or (b) the end date; provided, however, that Zynga does not have this right to terminate the merger agreement if it is then in material breach of any of its representations, warranties, covenants or agreements contained in the merger agreement; or |
| • | prior to the Take-Two special meeting, if (i) there shall have been a Take-Two change of recommendation or the Take-Two board of directors shall have approved or recommended a Take-Two superior proposal (or the Take-Two board of directors resolves to do any of the foregoing), (ii) Take-Two or any of its subsidiaries shall have entered into any definitive acquisition agreement, merger agreement or similar definitive agreement to consummate a Take-Two alternative acquisition proposal, whether or not permitted by the merger agreement or (iii) Take-Two shall be in intentional breach of its obligations under the merger agreement regarding third-party acquisition proposals as described under the section titled “The Merger Agreement—Go-Shop Period; Restrictions on Solicitations of Other Offers.” |
Zynga will be obligated to pay to Take-Two a termination fee of $550,000,000 (and reimbursement for expenses of enforcing the right to receive the termination fee) if:
| • | Take-Two terminates the merger agreement because, prior to the Zynga special meeting, (i) there shall have been a Zynga change of recommendation or the Zynga board of directors shall have approved or recommended a Zynga superior proposal (or the Zynga board of directors resolves to do any of the foregoing), (ii) Zynga or any of its subsidiaries shall have entered into any definitive acquisition agreement, merger agreement or similar definitive agreement to consummate a Zynga alternative acquisition proposal, whether or not permitted by the merger agreement or (iii) Zynga is in intentional breach of any of its obligations under the merger agreement regarding third-party acquisition proposals as described under the section titled “The Merger Agreement—Go-Shop Period; Restrictions on Solicitations of Other Offers”; |
| • | (i) Zynga or Take-Two terminates the merger agreement because the required Zynga vote was not obtained, (ii) at or prior to the time of the Zynga special meeting there is publicly disclosed or announced a bona fide written Zynga alternative acquisition proposal that has not been publicly withdrawn at least five business days prior to the time of the Zynga special meeting and (iii) within twelve (12) months following the termination of the merger agreement, Zynga consummates a Zynga alternative acquisition proposal, or enters into a definitive agreement to consummate a Zynga alternative acquisition proposal and the transaction contemplated thereby is subsequently consummated (except that, for this purpose, each reference to “more than 20%” in the definition of “Zynga alternative acquisition proposal” is deemed to be a reference to “more than 50%”); |
| • | (i) Take-Two terminates the merger agreement (a) because of a failure of the closing of the combination to occur on or before the end date and such failure was primarily attributable to a breach of any provision of the merger agreement by Zynga (other than Zynga’s obligations to cooperate with Take-Two’s efforts to obtain financing in connection with the combination) or (b) because of a breach by Zynga of a representation, warranty or covenant contained in the merger agreement such that the relevant conditions to Take-Two’s obligations to complete the combination would not be satisfied, (ii) at or prior to the time of such termination there shall have been publicly disclosed or announced a bona fide written Zynga alternative acquisition proposal that has not been publicly withdrawn at least five business days prior to the time of such termination and (iii) within twelve (12) months following the termination of the merger agreement, Zynga consummates a Zynga alternative acquisition proposal, or enters into a definitive agreement to consummate a Zynga alternative acquisition proposal and the transaction contemplated thereby is subsequently consummated (except that, for this purpose, each reference to “more than 20%” in the definition of “Zynga alternative acquisition proposal” is deemed to be a reference to “more than 50%”); or |
| • | Zynga terminates the merger agreement because, prior to the receipt of the required Zynga vote and on or after the Zynga no-shop period start date, the Zynga board of directors authorizes Zynga to enter into a definitive acquisition agreement with respect to a Zynga superior proposal. |
Additionally, if Zynga had terminated the merger agreement because prior to the receipt of the required Zynga vote and prior to the Zynga no-shop period start date, the Zynga board of directors had authorized Zynga to enter into a definitive acquisition agreement with respect to a Zynga superior proposal, Zynga would have been required to pay to Take-Two a termination fee of $400,000,000 (and reimbursement for expenses of enforcing the right to receive such fee).
Take-Two will be obligated to pay to Zynga the termination fee of $550,000,000 (and reimbursement for expenses of enforcing the right to receive the termination fee) if:
| • | Zynga terminates the merger agreement because, prior to the Take-Two special meeting, (i) the Take-Two board of directors withdraws, or modifies or amends in an adverse manner, its approval or recommendation of the merger agreement or the combination, (ii) Take-Two or any of its subsidiaries enter into any definitive agreement to consummate a Take-Two alternative acquisition proposal or (iii) Take-Two is in intentional breach of its obligations under the merger agreement regarding third-party acquisition proposals as described under the section titled “The Merger Agreement—Go-Shop Period; Restrictions on Solicitations of Other Offers”; |
| • | (i) Zynga or Take-Two terminates the merger agreement because the required Take-Two vote was not obtained, (ii) at or prior to the time of the Take-Two special meeting there is publicly disclosed or announced a bona fide written Take-Two alternative acquisition proposal that has not been publicly withdrawn at least five business days prior to the time of the Take-Two special meeting and (iii) within twelve (12) months following the termination of the merger agreement, Take-Two consummates a Take-Two alternative acquisition proposal, or enters into a definitive agreement to consummate a Take-Two alternative acquisition proposal and the transaction contemplated thereby is subsequently consummated (except that, for this purpose, each reference to “more than 20%” in the definition of “Take-Two alternative acquisition proposal” is deemed to be a reference to “more than 50%”); or |
| • | (i) Zynga terminates the merger agreement (a) because of a failure of the closing of the combination to occur on or before the end date and such failure was primarily attributable to a breach of any provision of the merger agreement by Take-Two or (b) because of a breach by Take-Two, Merger Sub 1 or Merger Sub 2 of a representation, warranty or covenant contained in the merger agreement the relevant conditions to Zynga’s obligations to complete the combination would not be satisfied, (ii) at or prior to the time of such termination there shall have been publicly disclosed or announced a bona fide written Take-Two alternative acquisition proposal that has not been publicly withdrawn at least five business days prior to the time of such termination and (iii) within twelve (12) months following the termination of merger agreement, Take-Two consummates a Take-two alternative acquisition proposal, or enters into a definitive agreement to consummate a Take-Two alternative acquisition proposal and the transaction contemplated thereby is subsequently consummated (except that, for this purpose, each reference to “more than 20%” in the definition of “Take-Two alternative acquisition proposal” is deemed to be a reference to “more than 50%”). |
Additionally, if Zynga or Take-Two terminates the merger agreement because the required Take-Two vote was not obtained and at the time of such termination the required Zynga vote was already obtained, the Take-Two shall pay to Zynga an expense reimbursement of $50,000,000. Further, if Zynga or Take-Two terminates the merger agreement because the required Zynga vote was not obtained and at the time of such termination the required Take-Two vote was already obtained, Zynga shall pay to Take-Two an expense reimbursement of $50,000,000.
Concurrently with the execution of the merger agreement, on January 9, 2022, Take-Two and Zynga entered into (i) a voting agreement (the “Take-Two voting agreement”) with Mr. Zelnick, certain of Mr. Zelnick’s affiliates, Lainie Goldstein, Daniel Emerson, J Moses, Michael Sheresky, Michael Dornemann, Susan Tolson, LaVerne Srinivasan, Paul Viera, certain of Mr. Viera’s affiliates, and Roland Hernandez and (ii) voting agreements (the “Zynga voting agreements”) with Amy Rawlings, Bernard Kim, Carol G. Mills, Ellen F. Siminoff, Frank Gibeau, James Gerard Griffin, Janice M. Roberts, Jeff Ryan, Louis J. Lavigne, Jr., Mark Pincus, Noel B. Watson, Phuong Y. Phillips, Regina E. Dugan, and William “Bing” Gordon, and certain of their respective affiliates, in each case
in such person’s capacity as a stockholder of Take-Two or Zynga, as applicable. The Take-Two voting agreement and the Zynga voting agreements are each referred to as a “voting agreement” and each Take-Two or Zynga stockholder party thereto, as applicable, if referred to as “supporting stockholder.”
Each Take-Two supporting stockholder agreed that from the date of the voting agreement until the date that the voting agreement terminates, such supporting stockholder will vote or cause to be voted all shares of Take-Two common stock that he, she or it beneficially owns, among other things:
| • | against any action or agreement that has or would reasonably be likely to result in Take-Two’s representations, warranties, and obligations not being fulfilled; |
| • | against any Take-Two alternative acquisition proposal; |
| • | against any amendment to Take-Two’s organization documents if such amendment would reasonably be expected to prevent or materially delay the consummation of the combination; and |
| • | against any other action or agreement that is intended, or would reasonably be expected, to materially impede, interfere with or delay the combination or the transactions contemplated by the merger agreement. |
Each Zynga supporting stockholder agreed that from the date of the voting agreement until the date that the voting agreement terminates, such supporting stockholder will vote or cause to be voted all shares of Zynga common stock that he, she or it beneficially owns, among other things:
| • | in favor of the adoption of the merger agreement; |
| • | against any action or agreement that has or would reasonably be likely to result in Zynga’s representations, warranties, and obligations not being fulfilled; |
| • | against any Zynga alternative acquisition proposal; |
| • | against any amendments to the Zynga organizational documents if such amendment would reasonably be expected to prevent or materially delay the consummation of the combination; and |
| • | against any other action or agreement that is intended, or would reasonably be expected, to materially impede, interfere with or delay the combination or the transactions contemplated by the merger agreement. |
As of April 4, 2022, the Take-Two supporting stockholders subject to the Take-Two voting agreements owned and were entitled to vote in the aggregate less than 1% of the outstanding shares of Take-Two common stock, and the Zynga supporting stockholders subject to the Zynga voting agreement owned and were entitled to vote in the aggregate approximately 5.4% of the outstanding shares of Zynga common stock. For more information, see the section titled “Voting Agreements” and Annexes F-1 through F-3 to this joint proxy statement/prospectus.
U.S. Federal Income Tax Consequences of the Combination (Page 191)
Take-Two and Zynga intend for the combination to be treated as a “reorganization” within the meaning of Section 368(a) of the Code. It is a condition to Take-Two’s obligation to complete the combination that Take-Two receive an opinion from Willkie, counsel to Take-Two, to the effect that the combination will be treated as a reorganization within the meaning of Section 368(a) of the Code. It is a condition to Zynga’s obligation to complete the combination that Zynga receive an opinion from Wilson Sonsini Goodrich & Rosati, counsel to Zynga, to the effect that the combination will be treated as a reorganization within the meaning of Section 368(a) of the Code. Assuming the receipt and accuracy of these opinions, a holder of shares of Zynga common stock will generally recognize gain (but not loss) for U.S. federal income tax purposes in an amount
equal to the lesser of (i) the amount of gain realized (i.e., the excess, if any, of the sum of the amount of cash and the fair market value, as of the effective time of the merger, of the Take-Two shares received in the combination over that stockholder’s adjusted tax basis in its Zynga shares surrendered) and (ii) the amount of cash received in the combination.
You should read the section titled “U.S. Federal Income Tax Consequences of the Combination” beginning on page 191 for a more complete discussion of the U.S. federal income tax consequences of the combination. Tax matters can be complicated, and the tax consequences of the combination to you will depend on your particular situation. You should consult your tax advisor to determine the tax consequences to you of the combination.
Comparison of Stockholders’ Rights (Page 194)
Upon completion of the combination, Zynga stockholders receiving shares of Take-Two common stock will become Take-Two stockholders. The rights of Take-Two stockholders will be governed by the DGCL and the Take-Two charter and Take-Two bylaws in effect at the effective time. As Take-Two and Zynga are both Delaware corporations, the rights of Take-Two stockholders and Zynga stockholders are not materially different. However, there are certain differences in the rights of Take-Two stockholders under the Take-Two charter and Take-Two bylaws and of Zynga stockholders under the Zynga charter and Zynga bylaws. See the section titled “Comparison of Stockholders’ Rights.”
Listing of Take-Two Common Stock; Delisting and Deregistration of Zynga Common Stock (Page 117)
It is a condition to the combination that the shares of Take-Two common stock to be issued to Zynga stockholders in the combination be approved for listing on Nasdaq, subject to official notice of issuance. If the combination is completed, Zynga common stock will be delisted from Nasdaq and deregistered under the Exchange Act, following which Zynga will no longer be required to file periodic reports with the SEC with respect to Zynga common stock.
In evaluating the merger agreement, the combination, the share issuance and the charter amendment you should carefully read this joint proxy statement/prospectus and give special consideration to the factors discussed in the section titled “Risk Factors.”
