The following is a description of material aspects of the combination. While Take-Two and Zynga believe that the following description covers the material terms of the combination, the description may not contain all of the information that is important to you. You are encouraged to read carefully this entire joint proxy statement/ prospectus, including the text of the merger agreement attached as Annex A hereto, for a more complete understanding of the combination. In addition, important business and financial information about each of Take-Two and Zynga is contained or incorporated by reference in this joint proxy statement/prospectus. See “Where You Can Find More Information.”
Take-Two, Merger Sub 1, Merger Sub 2 and Zynga have entered into the merger agreement, which provides for the acquisition of Zynga by Take-Two through a merger of Merger Sub 1 with and into Zynga (the “merger”), with Zynga continuing as the surviving corporation and as a wholly owned subsidiary of Take-Two, and immediately following the merger, Zynga will merge with and into Merger Sub 2, with Merger Sub 2 continuing as the surviving corporation (the “subsequent merger” and together with the merger, the “combination”). As a result of the combination, the separate existence of Zynga and Merger Sub 1 will cease and Merger Sub 2 will continue its existence under the DGCL as the surviving corporation and as a wholly owned subsidiary of Take-Two. The surviving corporation will be named Zynga Inc.
If the combination is completed, each issued and outstanding share of Zynga common stock, other than dissenting shares and treasury shares, will be converted into the right to receive (i) a number of shares of 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.
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. Using an assumed Take-Two common stock price equal to the closing price of Take-Two common stock on Nasdaq of $156.50 on March 28, 2022, the latest practicable trading day prior to the date of the accompanying joint proxy statement/prospectus, the exchange ratio is 0.04064 and the implied value of the consideration payable to Zynga stockholders in the combination was approximately $9.86 per share of Zynga common stock. 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. The market price of shares of Take-Two common stock that Zynga stockholders receive at the time the combination is
completed could be greater than, less than or the same as the market price of shares of Take-Two common stock on the date of this joint proxy statement/prospectus or on the date of the Take-Two special meeting and the Zynga special meeting. Accordingly, you should obtain current market quotations for Take-Two common stock and Zynga common stock before deciding how to vote on the Take-Two share issuance proposal, Take-Two charter amendment proposal and the Zynga merger proposal, as applicable. Take-Two common stock and Zynga common stock are traded on Nasdaq, under the symbols “TTWO” and “ZNGA,” respectively. Shares of Take-Two common stock will continue trading on Nasdaq under the symbol “TTWO” after completion of the combination.
The Zynga board of directors regularly evaluates Zynga’s strategic direction and ongoing business plans with a view toward strengthening Zynga’s business and enhancing stockholder value. As part of this evaluation, the Zynga board of directors has, from time to time, considered a variety of strategic alternatives. These have included, among others, (1) the continuation of, and potential improvements to, Zynga’s current business plan, including the investment in, and development of, new products, services and game titles, with Zynga remaining an independent entity; (2) capital allocation initiatives; (3) potential expansion opportunities through acquisitions, partnerships or other commercial relationships, including the continuation of Zynga’s strategy of acquiring smaller game studios; and (4) business combinations and other financial and strategic alternatives, including the sale of Zynga. The Zynga board of directors was also aware of the accelerating pace of consolidation in the interactive entertainment industry.
As active participants in the interactive entertainment industry with complementary product offerings, Zynga and Take-Two are well known to each other. From time to time, members of Zynga management have met with members of Take-Two management to discuss their industry and their respective companies. At various points in the past, Take-Two expressed non-specific interest in acquiring Zynga, including in January 2021, after Take-Two management had met with its financial advisors and board of directors. These discussions were general in nature and never advanced beyond preliminary, hypothetical conversations.
In February 2021, Frank Gibeau, Zynga’s Chief Executive Officer, and Bernard Kim, Zynga’s President of Publishing, met with senior executives of a strategic acquirer (which is referred to as “Party A”) at Party A’s request. Those present at the meeting discussed Zynga’s business operations and industry and the potential for Zynga to benefit from certain of Party A’s complementary products and service offerings, as well as ways that Zynga and Party A could work together. In the months that followed, Messrs. Gibeau and Kim met several additional times with senior executives of Party A to discuss these topics. At various points during these discussions, senior executives of Party A expressed general interest in an acquisition of Zynga by Party A. However, Party A did not make a specific acquisition proposal. Messrs. Gibeau and Kim kept the Zynga board of directors updated about their discussions with Party A.
By September 2021, Party A had begun to express greater interest in exploring an acquisition of Zynga, including by requesting a formal management presentation regarding Zynga’s business and prospects. In response, in late September 2021, Mr. Gibeau and other members of Zynga management spoke with representatives of Goldman Sachs about Party A and its interest in a possible acquisition of Zynga. During this conversation, the parties also discussed, in general terms, (1) the nature of the strategic alternatives that could be available to Zynga should it elect to pursue a strategic review process; (2) the broad outlines of a process that Zynga could engage in to evaluate its strategic alternatives; and (3) the possibility that Goldman Sachs could serve as Zynga’s financial advisor. Goldman Sachs is well known to Zynga and Zynga management given Goldman Sachs’ qualifications, extensive expertise, international reputation, knowledge of the industry in which Zynga operates, and experience in advising similar companies in connection with potential strategic transactions. In addition, representatives from Goldman Sachs had from time-to-time presented to the Zynga board of directors and Zynga management about public market perspectives of Zynga, as well as strategic opportunities within the interactive entertainment industry. In particular, representatives from Goldman Sachs presented to the Zynga board of directors in February 2021 regarding valuation trends and drivers in the interactive entertainment industry, as well as about
potential acquisition targets for Zynga, strategic partnership opportunities, and potential acquirers of some or all of Zynga.
In late September 2021, Messrs. Gibeau and Kim met with senior executives of a strategic acquirer (which is referred to as “Party B”) at Party B’s request. During this meeting, Party B expressed non-specific interest in an acquisition of Zynga. Party B did not make a formal acquisition proposal in this discussion. A few days after this meeting, senior executives of Party B suggested that Party B’s chief executive officer should meet with Mr. Gibeau to further discuss Party B’s perspectives on a potential acquisition of Zynga.
On October 4, 2021, the Zynga board of directors met, with members of Zynga management and representatives of Wilson Sonsini Goodrich & Rosati, Professional Corporation (which is referred to as “Wilson Sonsini”), outside legal counsel to Zynga, in attendance. Mr. Gibeau reviewed for the Zynga board of directors the nature of discussions with Party A and Party B, including Party A’s desire to meet with Zynga management to better understand Zynga’s business and strategy. Mr. Gibeau reminded the Zynga board of directors of historical discussions between Zynga and Take-Two, which discussions included Take-Two’s non-specific interest in acquiring Zynga prior to October 2021. The representatives of Wilson Sonsini reviewed with the members of the Zynga board of directors their fiduciary duties. It was the consensus of the Zynga board of directors that Zynga management should agree to Party A’s request for a management presentation, and that Mr. Gibeau should continue discussions with Party A. Given Party A’s prior non-specific expressions of interest in an acquisition of Zynga, the Zynga board of directors was aware that the meeting with Party A had the potential to lead to a substantive proposal by Party A to acquire Zynga. As result, the Zynga board of directors also discussed various ways in which Zynga could undertake a review of its strategic alternatives. To provide assistance to, and oversight of, Zynga management, the Zynga board of directors established a strategic committee (which we refer to as the “Strategic Committee”). The Strategic Committee was formed in the light of (1) the potentially significant workload that could be involved in any decision by Zynga to evaluate strategic alternatives; (2) the possibility that Zynga management may need feedback and direction on relatively short notice; and (3) the benefits and convenience of having a subset of directors oversee any process of considering strategic alternatives. The Zynga board of directors authorized and instructed the Strategic Committee to, among other things, (1) oversee and provide assistance to Zynga management and its advisors with respect to the exploration, evaluation, consideration, review and negotiation of the terms and conditions of any strategic alternative, including any sale of Zynga; (2) take such other actions with respect to any strategic alternative as the Strategic Committee deemed necessary, appropriate or advisable; and (3) recommend what action, if any, that the Zynga board of directors should take with respect to any strategic alternative. The Zynga board of directors retained the power and authority to approve the final decision on pursuing a strategic alternative, including a sale of Zynga. It was also understood that the Zynga board of directors would continue to have an active role in the consideration of strategic alternatives. The Zynga board of directors appointed Janice Roberts, Zynga’s Lead Independent Director, and Ellen Siminoff, the Chair of Zynga’s Nominating/Corporate Governance Committee, both of whom are independent members of the Zynga board of directors, as the members of the Strategic Committee. Noting the preliminary discussions between Goldman Sachs and Zynga management, the Zynga board of directors instructed the Strategic Committee to review the retention of a financial advisor to assist Zynga.
At various points from October 4, 2021, to October 6, 2021, the Strategic Committee met, with members of Zynga management and representatives of Wilson Sonsini each generally in attendance. During these meetings, the Strategic Committee (1) interviewed Goldman Sachs to serve as financial advisor to Zynga; and (2) discussed Goldman Sachs’ role and responsibilities as financial advisor to Zynga. At points, the representatives of Wilson Sonsini reviewed with the members of the Strategic Committee their fiduciary duties.
On October 6, 2021, the Zynga board of directors met, with members of Zynga management and representatives of Wilson Sonsini in attendance. Members of Zynga management reviewed with the Zynga board of directors a draft of Zynga’s long-range plan prepared by Zynga management, and described, among other things, the process for preparing Zynga’s long-range plan, including the underlying assumptions and various execution and other risks to realizing Zynga’s long-range plan. Additional information about the preparation and substance of
Zynga’s long-range plan is contained in the section of this joint proxy statement/prospectus titled “Zynga Unaudited Prospective Financial Information.” The Zynga board of directors approved providing Zynga’s long-range plan to Party A and to Zynga’s financial advisor. The Strategic Committee provided its recommendation that the Zynga board of directors retain Goldman Sachs as Zynga’s financial advisor and reviewed the proposed terms of an engagement letter with Goldman Sachs. After considering Goldman Sachs’ qualifications, extensive expertise, international reputation, knowledge of the industry in which Zynga operates and experience in similar situations, the Zynga board of directors determined to retain Goldman Sachs as Zynga’s financial advisor. The Zynga board of directors delegated to the Strategic Committee the authority to negotiate an appropriate engagement letter with Goldman Sachs. Thereafter, the Strategic Committee continued to negotiate the terms of Goldman Sachs’ engagement letter.
On October 7, 2021, Zynga entered into a confidentiality agreement with Party A. This agreement did not include a “standstill” or other restriction on Party A’s ability to make public or private proposals to acquire Zynga.
On October 7, 2021, members of Zynga management gave a management presentation to Party A regarding Zynga and its business and prospects. Representatives of Goldman Sachs also attended this meeting. In connection with this meeting, Party A received a copy of Zynga’s long-range plan.
Also on October 7, 2021, the chief executive officer of a company (which is referred to as “Party C”) contacted Mr. Gibeau to express an interest in discussing potential strategic partnerships between Zynga and Party C. From time to time in the past, Zynga had considered the potential for transactions or strategic partnerships with Party C, but these considerations had never advanced beyond the formative stages.
On October 8, 2021, Mr. Zelnick called Mr. Gibeau to discuss Take-Two’s interest in a potential transaction with Zynga. Mr. Zelnick noted that any transaction between the two companies would likely have a significant stock component. This discussion was preliminary, and Mr. Zelnick did not make a specific acquisition proposal. Mr. Zelnick expressed a desire to meet with Mr. Gibeau again in the future regarding a combination of Zynga and Take-Two.
Also on October 8, 2021, the Strategic Committee met, with other members of the Zynga board of directors, members of Zynga management and representatives of Wilson Sonsini in attendance. Mr. Gibeau (1) reviewed the meeting with Party A, including that Party A was studying Zynga’s long-range plan and would respond in due course; (2) reminded the Strategic Committee of Party B’s desire for Mr. Gibeau to meet with Party B’s chief executive officer; and (3) updated the Strategic Committee on the conversations with Party C and Take-Two (including the proposed meeting with Mr. Zelnick in several weeks). The Strategic Committee determined that it was appropriate to wait for additional feedback from Party A.
On October 15, 2021, the Strategic Committee met, with members of Zynga management and representatives of Goldman Sachs in attendance. The Strategic Committee discussed Zynga’s long-range plan.
On October 22, 2021, the Strategic Committee met, with members of Zynga management and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. The representatives of Goldman Sachs reviewed Goldman Sachs’ preliminary financial analyses of Zynga. The Strategic Committee discussed the lack of a formal response by Party A to the management presentation held earlier that month. It was the consensus of the Strategic Committee that, in the light of the lack of urgency displayed by Party A, further efforts in pursuit of an acquisition of Zynga by Party A were not warranted.
On October 27, 2021, Messrs. Gibeau and Zelnick confirmed that they would meet again in-person during the week of November 15, 2021.
On November 12, 2021, in preparation for a November 15th meeting between Messrs. Gibeau and Zelnick, the Take-Two board of directors met, with representatives of each of J.P. Morgan, LionTree and Willkie in attendance, to discuss the possibility of pursuing a potential business combination transaction with Zynga. At that meeting members of senior management of Take-Two reported to the Take-Two board of directors on the status of Zynga’s portfolio, the strategic rationale for pursuing the potential transaction and the anticipated benefits of a
potential transaction to Take-Two stockholders as well as a financial analysis of the proposed transaction. After discussion, it was the consensus of the Take-Two board of directors that Mr. Zelnick should continue to pursue the preliminary discussions with Mr. Gibeau and Zynga to determine whether the parties could come to an agreement with respect to a potential transaction. From and after this date and until the effective time, Mr. Zelnick provided regular updates to, and had numerous discussions with, members of the Take-Two board of directors regarding the status of ongoing discussions with Zynga.
On November 15, 2021, Messrs. Gibeau and Zelnick met. Mr. Zelnick expressed Take-Two’s interest in acquiring Zynga in a cash and stock transaction generally, but Mr. Zelnick did not propose a specific acquisition price. Mr. Zelnick stressed that Take-Two would only proceed with an acquisition if it was supported by the Zynga board of directors. Mr. Gibeau informed Mr. Zelnick that he would discuss Take-Two’s interest with the Zynga board of directors.
Following the November 15, 2021 meeting with Mr. Zelnick, Mr. Gibeau spoke with representatives of Goldman Sachs concerning Take-Two’s acquisition interest and the status of Party A’s consideration of a possible acquisition of Zynga. Representatives of Goldman Sachs subsequently spoke with a senior executive of Party A concerning the status of Party A’s evaluation of any acquisition of Zynga. The senior executive of Party A informed Goldman Sachs that, although Party A understood the strategic merits of acquiring Zynga, Party A was not prepared to present Zynga with an acquisition proposal at that time.
On November 17, 2021, the Strategic Committee met, with members of Zynga management and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. The representatives of Wilson Sonsini reviewed with the members of the Strategic Committee their fiduciary duties. The representatives of Goldman Sachs reviewed Goldman Sachs’ preliminary financial analyses of a possible combination of Zynga with Take-Two. The Strategic Committee determined that a combination of Zynga with Take-Two was potentially attractive and merited consideration by the Zynga board of directors. The Strategic Committee also discussed the recent conversation between representatives of Goldman Sachs and a senior executive of Party A, and the status of discussions with Party B. The representatives of Goldman Sachs reviewed with the Strategic Committee other potential strategic transaction partners for Zynga. Each potential partner was reviewed individually, with a focus on each potential partner’s (1) likely or previously expressed interest in a potential strategic transaction with Zynga; (2) track record of transactions; (3) ability to finance and consummate a transaction; and (4) larger strategic rationale for a transaction with Zynga.
On November 18, 2021, the Zynga board of directors met, with members of Zynga management and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. The representatives of Goldman Sachs reviewed Goldman Sachs’ preliminary financial analyses of a possible combination of Zynga with Take-Two. The Zynga board of directors determined that it was interested in further exploring such a transaction. As such, the Zynga board of directors determined to invite Take-Two to make a specific combination proposal. The Zynga board of directors discussed other companies (including Party A, Party B and Party C) that Zynga could contact regarding their interest in a strategic transaction with Zynga. The Zynga board of directors noted the risk that a broad transaction solicitation process could result in public speculation that Zynga was pursuing a sale, and that such speculation could be harmful to Zynga and its employees and business partners. With respect to Party A, it was the consensus of the Zynga board of directors that a competitive dynamic—in the form of specific acquisition interest expressed by a third party—could be helpful in causing Party A to accelerate its consideration of an acquisition of Zynga. With respect to Party B, it was the consensus of the Zynga board of directors that Party B might not be able to consider an acquisition of Zynga with urgency. After the meeting, Mr. Gibeau advised Mr. Zelnick that the Zynga board of directors had invited Take-Two to submit a combination proposal.
In early December 2021, Party B proposed a meeting between Party B’s chief executive officer and Mr. Gibeau in late January 2022.
On December 3, 2021, Zynga entered into a confidentiality agreement with Take-Two. This agreement did not include a “standstill” or other restriction on Take-Two’s ability to make public or private proposals to acquire Zynga.
Also on December 3, 2021, the Take-Two board of directors held a meeting with members of Take-Two senior management and representatives of each of J.P. Morgan, LionTree and Willkie in attendance. Mr. Zelnick updated the board members on recent discussions with Mr. Gibeau and the Take-Two board of directors approved the terms of a non-binding conditional offer to acquire Zynga for a mix of consideration consisting of shares of Take-Two common stock and cash having an assumed value of $9.85 per share of Zynga common stock, derived as described below.
On December 6, 2021, Messrs. Gibeau and Kim, as well as representatives of Goldman Sachs, met with Mr. Zelnick, members of Take-Two management and representatives of each of J.P. Morgan and LionTree. Mr. Zelnick proposed that Take-Two combine with Zynga, with each share of Zynga common stock being exchanged for consideration with an assumed value of $9.85 per share, 25% of which was to be in cash and 75% of which was to be in the form of shares of Take-Two common stock. The cash portion of the proposed consideration per share of Zynga common stock was $2.46 in cash, and the proposed exchange ratio was 0.0424 of a share of Take-Two common stock (at a fixed exchange ratio) per share of Zynga common stock, which assumed a value per share of Take-Two common stock equal to the then-current 20-day volume weighted average price of Take-Two common stock. We refer to this as the “initial Take-Two proposal.” In addition, Take-Two proposed that (1) Zynga and Take Two would agree to negotiate exclusively with each other; and (2) the transaction include a “go-shop” provision that would allow Zynga to affirmatively solicit acquisition interest from other companies for a period of time following entry into the merger agreement. Mr. Zelnick also requested the opportunity to discuss the proposal with the Zynga board of directors. Mr. Gibeau informed Mr. Zelnick that he would discuss the initial Take-Two proposal with the Zynga board of directors.
Later on December 6, 2021, the Strategic Committee met, with members of Zynga management and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. The representatives of Goldman Sachs reviewed Goldman Sachs’ preliminary financial analyses of the initial Take-Two proposal. The Strategic Committee determined that the initial Take-Two proposal merited consideration by the Zynga board of directors, and that Mr. Zelnick should be offered the opportunity to discuss the initial Take-Two proposal with the Zynga board of directors.
On December 9, 2021, the Strategic Committee met, with other members of the Zynga board of directors, members of Zynga management and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. The Strategic Committee discussed Mr. Zelnick’s upcoming meeting with the Zynga board of directors and Zynga’s goals for the meeting. Mr. Gibeau also informed the Strategic Committee of Mr. Zelnick’s desire to meet socially for dinner later that evening. Mr. Gibeau and the Strategic Committee discussed the merits of such a meeting, and it was agreed that Mr. Gibeau should meet with Mr. Zelnick. Messrs. Gibeau and Zelnick subsequently met for dinner.
Also on December 9, 2021, Goldman Sachs and the Strategic Committee concluded negotiation of the terms of Goldman Sachs’ engagement by Zynga. Zynga subsequently entered into an engagement letter with Goldman Sachs, as approved by the Strategic Committee.
On December 10, 2021, the Zynga board of directors met, with members of Zynga management and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. Mr. Zelnick and other members of Take-Two management and representatives of J.P. Morgan and LionTree were present for a portion of the meeting, during which they discussed the initial Take-Two proposal and the prospects of the combined company. Following the departure of Mr. Zelnick and the other members of Take-Two management and representatives of J.P. Morgan and LionTree from the meeting, the representatives of Wilson Sonsini reviewed with members of the Zynga board of directors their fiduciary duties. The Zynga board of directors discussed the initial Take-Two proposal and the strategic positioning of the combined company.
On December 11, 2021, the Zynga board of directors met, with members of Zynga management and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. Members of Zynga management reviewed with the Zynga board of directors (1) the financial outlook for Zynga for the fiscal year ended December 31, 2021; and (2) an updated version of Zynga’s long-range plan that reflected Zynga management’s latest thinking based on the performance of Zynga’s business. The Zynga board of directors approved Zynga’s updated long-range plan and instructed management to provide the updated long-range plan to Goldman Sachs. The representatives of Goldman Sachs reviewed the initial Take-Two proposal and discussed various alternatives available to Zynga and strategic considerations, including other companies (such as Party A, Party B and Party C) that might have an interest in a strategic transaction with Zynga.
Later on December 11, 2021, the Strategic Committee met, with members of Zynga management and representatives of Wilson Sonsini in attendance. The Strategic Committee discussed the initial Take-Two proposal, as well as other strategic alternatives available to Zynga.
On December 13, 2021, the Zynga board of directors met, with members of Zynga management and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. The representatives of Goldman Sachs reviewed Goldman Sachs’ preliminary financial analyses of the combined company and discussed various perspectives on Zynga’s long-range plan. It was the consensus of the Zynga board of directors that the initial Take-Two proposal was potentially attractive and merited additional consideration. The Zynga board of directors determined that it wished to further understand the prospects for the combined company and the strategic rationale for the transaction.
Later on December 13, 2021, the Strategic Committee met, with members of Zynga management and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. The Strategic Committee determined that members of the Zynga board of directors should meet again with Mr. Zelnick to further understand his views on the strategic rationale for a combination of Zynga with Take-Two. The Strategic Committee also discussed the appropriate time to again contact Party A concerning Party A’s interest in an acquisition of Zynga.
On December 15, 2021, the Zynga board of directors met, with members of Zynga management and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. Members of Zynga management reviewed (1) preliminary views on potential synergies resulting from a combination of Zynga with Take-Two, including the potential for significant revenue synergies; and (2) potential strategic alternatives available to Zynga, including transformative acquisitions and acquisitions that would expand Zynga into new lines of business. As part of this discussion, Zynga management described (1) potential challenges to and considerations in an acquisition of Zynga by Party B; and (2) a possible transaction with Party C and the complexities and other considerations inherent in such a transaction. The Zynga board of directors instructed Goldman Sachs to inform Party A that Zynga had received a credible acquisition proposal that the Zynga board of directors was seriously evaluating. The Zynga board of directors made this decision in the light of (1) Party A’s previously expressed interest in an acquisition of Zynga; and (2) a belief that a competitive dynamic might prompt Party A to accelerate its timing related to considering an acquisition of Zynga.
On December 16, 2021, as instructed by the Zynga board of directors, representatives of Goldman Sachs spoke with a senior executive of Party A about Zynga and informed Party A that Zynga had received a credible acquisition proposal that the Zynga board of directors was seriously evaluating.
Later on December 16, 2021, the Strategic Committee met, with members of Zynga management and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. The Strategic Committee discussed the conversation between representatives of Goldman Sachs and senior executives of Party A.
On December 17, 2021, Mr. Zelnick met with Mr. Gibeau, Ms. Siminoff and Mark Pincus, Zynga’s chairman. Those present discussed the strategic rationale for a combination of Zynga with Take-Two, including how to
position the combined company to investors. During this discussion, Mr. Zelnick expressed Take-Two’s willingness to expand the Take-Two board of directors to accommodate two of the current members of the Zynga board of directors.
Later on December 17, 2021, Mr. Zelnick spoke with William “Bing” Gordon, a member of the Zynga board of directors, about the strategic rationale for a combination of Zynga with Take-Two, including how to position the combined company to investors.
Also on December 17, 2021, Goldman Sachs provided the Zynga board of directors with customary relationship disclosures regarding Goldman Sachs’ relationships with Take-Two, Party A and Party B; the Zynga board of directors did not identify any concerns with these disclosures. In addition, Goldman Sachs provided to Zynga management, for the information of the Zynga board of directors, materials that summarized, based on theoretical models, the potential effects of the announcement and of the consummation of an acquisition of Zynga on the capped call transactions that Zynga entered into with Goldman Sachs and other counterparties, each acting as principal for its own account, with respect to Zynga’s 0.25% convertible senior notes due 2024 in June 2019 and 0% convertible senior notes due 2026 in December 2020.
On December 18, 2021, the Strategic Committee met, with members of Zynga management and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. The discussions with Mr. Zelnick on December 17, 2021, were reviewed by the Strategic Committee. In particular, the Strategic Committee discussed the strategic rationale for a combination of Zynga with Take-Two. The Strategic Committee again discussed contacting Party B concerning its interest in an acquisition of Zynga. Given (1) the potential negative competitive impact to Zynga that could arise from sharing any of Zynga’s confidential information with Party B, (2) the lack of urgency displayed by Party B, (3) possible disruptive cultural and social implications of a potential combination of Zynga and Party B and (4) Zynga’s ability to solicit an alternative transaction during the “go-shop” period proposed by Take-Two, it was the consensus of the Strategic Committee not to contact Party B at that time. The lack of substantive response from Party A to the message delivered by Goldman Sachs was discussed. The representatives of Goldman Sachs reviewed a variety of ways to improve the initial Take-Two proposal for the benefit of Zynga’s stockholders, including by increasing the cash consideration per share or implementing a “collar” on the value of the stock consideration that Zynga’s stockholders receive (with the objective of increasing the certainty and stability of value delivered to Zynga’s stockholders at closing).
On December 19, 2021, the Strategic Committee met, with other members of the Zynga board of directors, members of Zynga management and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. The Strategic Committee again discussed contacting Party B concerning its interest in an acquisition of Zynga, and again determined not to contact Party B at that time (for the same reasons previously identified). The representatives of Goldman Sachs again reviewed a variety of ways to improve the initial Take-Two proposal for the benefit of Zynga’s stockholders, including by increasing the cash consideration per share or implementing a “collar” on the value of the stock consideration that Zynga’s stockholders receive. The Strategic Committee determined to recommend to the Zynga board of directors a counterproposal for the combination of Zynga with Take-Two, with each share of Zynga common stock being exchanged for $3.50 in cash and 0.0390 of a share of Take-Two common stock (with a fixed exchange ratio). This counterproposal implied a value of $10.45 per share of Zynga common stock based on the then-current share price of Take-Two common stock. We refer to this counterproposal as the “first Zynga counterproposal.”
On December 20, 2021, the Zynga board of directors met, with members of Zynga management and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. The discussions with Take-Two and Party A were reviewed, including Party A’s lack of response following the December 16, 2021, discussion with representatives of Goldman Sachs. The Strategic Committee’s decision not to contact Party B was also reviewed. The representatives of Goldman Sachs reviewed Goldman Sachs’ preliminary financial analyses of the first Zynga counterproposal and the ways in which that proposal improved the initial Take-Two proposal for the benefit of Zynga’s stockholders. The Zynga board of directors approved the first Zynga counterproposal and
directed Goldman Sachs to share it with Take-Two. Goldman Sachs subsequently delivered the first Zynga counterproposal to representatives of Take-Two.
On December 21, 2021, the Strategic Committee met, with members of Zynga management and representatives of Wilson Sonsini in attendance. The representatives of Wilson Sonsini reviewed with the members of the Strategic Committee their fiduciary duties.
Also on December 21, 2021, after reviewing the first Zynga counterproposal, and following discussions and analysis with its financial advisors and with the support of the Take-Two board of directors, Take-Two made a new proposal to combine with Zynga, with each share of Zynga common stock being exchanged for $3.06 in cash and 0.0398 of a share of Take-Two common stock (at a fixed exchange ratio). Take-Two’s proposal implied a value of $10.20 per share of Zynga common stock based on the then-current share price of Take-Two common stock. We refer to this proposal as the “revised Take-Two proposal.” The revised Take-Two proposal also contemplated a 45-day “go-shop” period.
Later on December 21, 2021, the Strategic Committee met, with other members of the Zynga board of directors, members of Zynga management and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. The representatives of Goldman Sachs reviewed Goldman Sachs’ preliminary financial analyses of the revised Take-Two proposal and ways to improve the proposal for the benefit of Zynga’s stockholders. The Strategic Committee instructed Goldman Sachs to prepare additional financial analyses of the revised Take-Two proposal.
Still later on December 21, 2021, the Strategic Committee met, with other members of the Zynga board of directors, members of Zynga management and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. The representatives of Goldman Sachs reviewed Goldman Sachs’ additional preliminary financial analyses of the revised Take-Two proposal. The Strategic Committee instructed Goldman Sachs to share with Take-Two a counterproposal for a combination with Zynga, with each share of Zynga common stock being exchanged for $3.50 in cash and 0.0376 of a share of Take-Two common stock (at a fixed exchange ratio). This counterproposal implied a value of $10.25 per share of Zynga common stock based on the then-current share price of Take-Two common stock. We refer to this counterproposal as the “second Zynga counterproposal.” Goldman Sachs subsequently delivered the second Zynga counterproposal to representatives of Take-Two.
Also on December 21, 2021, Take-Two management conveyed the second Zynga counterproposal to its board of directors, noting that the second Zynga counterproposal increased the implied value to $10.25 per share of Zynga common stock, and increased the cash component of the merger consideration from $3.06 per share of Zynga common stock to $3.50 per share of Zynga common stock. After reviewing the second Zynga counterproposal, including materials provided by Take-Two’s financial advisors, Take-Two’s board of directors authorized Take-Two to accept the counterproposal.
On December 22, 2021, Take-Two accepted the second Zynga counterproposal subject to each company agreeing to negotiate exclusively with the other for three weeks, with the ability for either company to extend the exclusivity period for an additional week.
On December 22, 2021, the Strategic Committee met, with members of Zynga management and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. It was noted that Party A had still not responded following the message delivered by Goldman Sachs on December 16, 2021. The Strategic Committee determined to recommend that the Zynga board of directors agree to Take-Two’s exclusivity proposal.
Later on December 22, 2021, the Zynga board of directors met, with members of Zynga management and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. The representatives of Goldman Sachs reviewed Goldman Sachs’ preliminary financial analyses of the second Zynga counterproposal. The Zynga board of directors determined to accept Take-Two’s exclusivity proposal and expressed its support for the second Zynga counterproposal.
On December 23, 2021, Zynga and Take-Two amended their confidentiality agreement to (1) provide for the exclusivity period requested by Take-Two; and (2) include a “standstill” restricting either party’s ability to make public proposals to acquire the other.
Beginning on December 23, 2021, representatives of Take-Two and its advisors, including J.P. Morgan, LionTree and Willkie, outside legal counsel to Take-Two, were granted access to legal and operational due diligence documents and information regarding Zynga in an electronic data room to support their due diligence review of Zynga. Over the following days, members of Take-Two management and its advisors conducted operational, legal, financial, accounting, employment and other due diligence on Zynga, including reviewing Zynga’s commercial relationships, intellectual property, privacy, security, equity awards, employment arrangements and employee benefit plans, and compliance and regulatory matters. At various points, Take-Two management and its advisors met with Zynga management and its advisors regarding due diligence information, potential synergies, employee retention and related matters. Zynga also conducted reverse due diligence on Take-Two, including with respect to the Take-Two Long-Range Plan and the potential synergies that could result from the combination.
On December 25, 2021, representatives of Willkie sent a draft of the merger agreement to representatives of Wilson Sonsini. Over the following days, Zynga management and Take-Two management, and representatives of their respective legal advisors, negotiated the terms of the merger agreement. Key terms of the merger agreement negotiated between the parties included (1) whether, and the circumstances in which, each party’s board of directors could change its recommendation to its stockholders, or negotiate or accept an alternative acquisition transaction, including the circumstances in which the merger agreement could be terminated; (2) the amount of the termination fee payable by each party and the circumstances in which it would be payable; (3) the definition of “material adverse effect” with respect to each party; (4) the conditions to each party’s obligation to consummate the combination; (5) the parties’ obligations and commitments in connection with obtaining required regulatory approvals; and (6) the nature and scope of the interim operating covenants applicable to Zynga during the period prior to the closing of the combination.
On December 27, 2021, representatives of Willkie sent a draft of the Zynga voting agreement to representatives of Wilson Sonsini. It was proposed that Zynga’s directors and executive officers each agree to be parties to the Zynga voting agreement. Over the following days, Zynga management and Take-Two management, and representatives of their respective legal advisors, as well as representatives of the applicable Zynga stockholders requested to be party to the Zynga voting agreement, negotiated the terms of the Zynga voting agreement. Key terms of the Zynga voting agreement negotiated between the parties included (1) the circumstances in which the voting agreement would terminate; and (2) the restrictions on the ability of each stockholder party to the voting agreement to transfer such party’s shares of Zynga common stock. Zynga also requested that a Take-Two’s directors and executive officers be parties to a reciprocal voting agreement, and Take-Two agreed to this request.
On December 29, 2021, the Strategic Committee met, with members of Zynga management and representatives of Wilson Sonsini in attendance. The representatives of Wilson Sonsini reviewed with the Strategic Committee the principal terms of the merger agreement, including the circumstances in which the Zynga board of directors could change its recommendation to Zynga’s stockholders and the circumstances under which each party could terminate the merger agreement. Members of Zynga management reviewed a further updated version of Zynga’s long-range plan that reflected Zynga management’s latest thinking based on the performance of Zynga’s business. The Strategic Committee authorized providing Zynga’s updated long-range plan to Goldman Sachs and Take-Two.
On December 31, 2021, Take-Two management held a meeting with Zynga management and representatives of Goldman Sachs in attendance. During this meeting, Take-Two management discussed the long-range plan for Take-Two prepared by Take-Two management, as well as Take-Two’s business and prospects. (Additional information about the preparation and substance of Take-Two’s long-range plan is contained in, the section of this joint proxy statement/prospectus titled “Zynga Unaudited Prospective Financial Information”).
On January 2, 2022, the Strategic Committee met, with members of Zynga management and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. The representatives of Goldman Sachs reviewed Goldman Sachs’ preliminary financial analyses of Take-Two. Members of Zynga management and representatives of Goldman Sachs discussed the management meeting held with Take-Two on December 31, 2021, and provided an update on Zynga’s reverse due diligence on Take-Two, including Zynga’s review of Take-Two’s long-range plan, game title pipeline and potential synergies that could result from the combination. The Strategic Committee directed that Zynga management and Zynga’s financial and legal advisors continue their reverse due diligence on Take-Two and its business and prospects.
On January 5, 2022, the Strategic Committee met, with members of Zynga management and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. Members of Zynga management and the representatives of Goldman Sachs reviewed key reverse due diligence findings. The Strategic Committee discussed the attractiveness, stability and relative value of the stock portion of the consideration being offered by Take-Two.
Later on January 5, 2022, the Strategic Committee met, with members of Zynga management, other members of the Zynga board of directors and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. The Strategic Committee continued to review and discuss key reverse due diligence findings with respect to Take-Two.
On January 6, 2022, the Strategic Committee met, with members of Zynga management, other members of the Zynga board of directors and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. After discussing key reverse due diligence findings with respect to Take-Two, the Strategic Committee determined that, in the light of increasingly volatile market conditions, it desired additional certainty and stability regarding the value to be delivered to Zynga’s stockholders at the closing of the combination. As such, the Strategic Committee instructed Goldman Sachs to propose a 10 percent symmetrical “collar” on the value of the stock consideration that Zynga’s stockholders receive in the combination.
On January 7, 2022, Take-Two management presented Zynga’s proposal for a 10 percent symmetrical “collar” to the Take-Two board of directors, together with information regarding the proposed collar prepared by Take-Two’s financial advisors. After reviewing the information regarding the proposal, and with the approval of Take-Two’s board of directors, Take-Two proposed a 7.5 percent symmetrical collar on the value of the stock consideration that Zynga’s stockholders receive in the combination.
Later on January 7, 2022, the Take-Two board of directors held a meeting with members of Take-Two management and representatives of each of J.P. Morgan, LionTree and Willkie in attendance to take action on the proposed business combination. At the meeting members of senior management of Take-Two updated the Take-Two board of directors on the negotiation of the proposed merger with the management of Zynga, and reviewed the valuation of Zynga. Representatives of Willkie discussed the fiduciary duties applicable to the Take-Two board of directors and reviewed a summary of the proposed terms and conditions of the merger agreement, the voting agreements and the financing commitment papers. Representatives of each of J.P. Morgan and LionTree respectively reviewed for the Take-Two board of directors each of J.P. Morgan’s and LionTree’s respective preliminary financial analyses of the merger consideration provided for in the combination and answered questions from the directors with respect thereto.
Later on January 7, 2022, the Zynga board of directors met, with members of Zynga management and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. The members of Zynga management and the representatives of Goldman Sachs reviewed key reverse due diligence findings. The representatives of Goldman Sachs reviewed Goldman Sachs’ preliminary financial analyses of a combination of Zynga with Take-Two, including the impact of the “collar” on the stock consideration to be received by Zynga’s stockholders. The Zynga board of directors confirmed their agreement with Take-Two’s proposed 7.5 percent symmetrical collar on the value of the stock consideration. The representatives of Wilson Sonsini reviewed the
principal terms of the merger agreement, the Zynga voting agreement and the Take-Two voting agreement, including the points in each document that remained under negotiation. As part of the discussion, it was noted that Take-Two desired to begin discussions with each of Messrs. Gibeau and Kim concerning their employment with the combined company following the closing of the combination. The Zynga board of directors determined to consider this matter further at a future meeting. The Zynga board of directors discussed which of its members should join the Take-Two board of directors in connection with the closing of the combination. Ms. Roberts and Ms. Siminoff left the meeting and the Zynga board of directors discussed compensation for Ms. Roberts and Ms. Siminoff for their service on the Strategic Committee.
Still later on January 7, 2022, the Zynga board of directors met, with members of Zynga management and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. The representatives of Goldman Sachs reviewed Goldman Sachs’ preliminary financial analyses of a combination Zynga with Take-Two, including the impact of the “collar” on the stock consideration to be received by Zynga’s stockholders. The Zynga board of directors instructed Goldman Sachs to prepare additional financial analyses of a combination of Zynga with Take-Two. The representatives of Goldman Sachs and Ms. Roberts and Ms. Siminoff left the meeting. The Zynga board of directors approved the payment of $50,000 to each of Ms. Roberts and Ms. Siminoff for their service on the Strategic Committee, to be paid on or about April 15, 2022 (with such payment to be made regardless of the outcome of any strategic transaction involving Zynga). Ms. Roberts and Ms. Siminoff and the representatives of Goldman Sachs returned to the meeting. The representatives of Goldman Sachs reviewed Goldman Sachs’ additional preliminary financial analyses of a combination of Zynga with Take-Two. The Zynga board of directors approved Messrs. Gibeau and Kim commencing discussions with Take-Two regarding employment with Take-Two following the closing of the combination, following which, on January 9, 2022, Take-Two presented Messrs. Gibeau and Kim terms of employment to be documented prior to, and the effectiveness to be conditioned upon, (1) the closing of the combination and (2) the prior approval of the compensation committee of the Take-Two board of directors.
On January 9, 2022, the Take-Two board of directors held a meeting with members of Take-Two management and representatives of each of J.P. Morgan, LionTree and Willkie in attendance. Representatives of Willkie discussed the fiduciary duties applicable to the Take-Two board of directors and reviewed a summary of the proposed terms and conditions of the merger agreement, the voting agreements and the financing commitment papers. Representatives of each of J.P. Morgan and LionTree respectively reviewed for the Take-Two board of directors each of J.P. Morgan’s and LionTree’s financial analyses of the merger consideration provided for in the combination and answered questions from the directors with respect thereto. J.P. Morgan then rendered its oral opinion (subsequently confirmed by delivery of its written opinion) to the of Take-Two board of directors (in its capacity as such) 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. J.P. Morgan’s written opinion is described below in the section entitled “—Opinions of Take-Two’s Financial Advisors—Opinion of J.P. Morgan Securities, LLC.” LionTree then also 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 written opinion is described below in the section entitled “—Opinions of Take-Two’s Financial Advisors—Opinion of LionTree Advisors LLC.” After additional discussions and deliberations including as to the matters discussed in the sections entitled “Take-Two’s Reasons for the Mergers and Recommendation of the Take-Two Board of Directors”, the Take-Two board of directors unanimously determined that the merger agreement, the combination and the other transactions contemplated by the merger agreement, including the Take-Two stock issuance and the adoption of the Take-Two charter amendment, were advisable and fair to and in the best interests of Take-Two and its stockholders and approved the merger agreement, the combination and
the other transactions contemplated by the merger agreement. The Take-Two board of directors also resolved unanimously to recommend to Take-Two’s stockholders that they vote to approve the Take-Two stock issuance and approve the adoption of the Take-Two charter amendment.
On January 9, 2022 the Zynga board of directors met, with members of Zynga management and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. The representatives of Wilson Sonsini reviewed with the members of the Zynga board of directors their fiduciary duties. The representatives of Wilson Sonsini also reviewed the principal terms of the merger agreement, the Zynga voting agreement, the Take-Two voting agreement and the other relevant transaction documents. Mr. Gibeau noted that negotiations with Take-Two were continuing with respect to his employment by the combined company following the closing of the combination. The Zynga board of directors noted the customary relationship disclosures provided by Goldman Sachs regarding its relationship with Take-Two (which disclosures had been updated as of January 7, 2022); the Zynga board of directors did not identify any concerns with these disclosures. The representatives of Goldman Sachs reviewed with the Zynga board of directors Goldman Sachs’ financial analyses of the consideration. The representatives of Goldman Sachs then rendered the oral opinion of Goldman Sachs, 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 the assumptions set forth therein, the 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.
Later on January 9, 2022, representatives of Wilson Sonsini and Willkie finalized the forms of the merger agreement, Zynga voting agreement, Take-Two voting agreement and related transaction documents.
Still later on January 9, 2022 the Zynga board of directors met, with members of Zynga management and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. The representatives of Wilson Sonsini reviewed the final merger agreement with the Zynga board of directors. The representatives of Goldman Sachs confirmed the oral opinion of Goldman Sachs, subsequently confirmed by delivery of a 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 the assumptions set forth therein, the consideration to be paid to 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 members of Zynga management reviewed the terms of the employment arrangements offered by Take-Two to each of Messrs. Gibeau and Kim with respect to their employment by the combined company following the closing of the combination. The Zynga board of directors, after considering the factors more fully described in the section of this joint proxy statement/prospectus titled “The Combination—Zynga’s Reasons for the Combination and Recommendation of the Zynga Board of Directors,” (1) determined that the merger agreement, the combination and the other transactions contemplated by the merger agreement were fair to, advisable and in the best interests of Zynga and its stockholders; and (2) adopted and approved the merger agreement, the merger and the other transactions contemplated by the merger agreement. The representatives of Goldman Sachs described solicitation activities that could be undertaken during the “go-shop” period. The Zynga board of directors directed the Strategic Committee to oversee Zynga management and Goldman Sachs as they engaged in these activities following the entry into, and public disclosure of, the merger agreement.
Still later on January 9, 2022, following the meeting of the Zynga board of directors, Zynga and Take-Two executed the merger agreement. The Zynga voting agreement and the Take-Two voting agreement were also executed.
On January 10, 2022, Zynga and Take-Two publicly announced the combination and the execution of the merger agreement and relevant transaction agreements.
Also on January 10, 2022, as directed by the Zynga board of directors, representatives of Goldman Sachs began contacting potential strategic transaction counterparties (including Party A, Party B and Party C) about their interest in participating in the “go-shop” process.
Following entry into the merger agreement, the Strategic Committee met regularly, with members of Zynga management and representatives of each of Goldman Sachs and Wilson Sonsini in attendance. During these meetings, the representatives of Goldman Sachs described their contacts with third parties that might consider engaging in an alternative transaction to that contemplated by the merger agreement.
On February 25, 2022, Zynga announced the expiration of the “go-shop” period. During the “go-shop” period, Zynga and Goldman Sachs, at the direction of the Strategic Committee, actively solicited numerous parties
regarding a potential acquisition of Zynga. Zynga did not receive a Zynga alternative acquisition proposal during the “go-shop” period.
On March 10, 2022, the parties executed the First Amendment to the merger agreement to update the list of requisite non-U.S. antitrust approvals that are conditions to the obligation of Take-Two and Zynga to consummate the combination to consist of the approval of the applicable antitrust regulatory authority in Turkey, Germany, Austria and the United Kingdom (if the UK Competition and Markets Authority decides to open an investigation). As of the date of this joint proxy statement/prospectus, all required antitrust approvals have been obtained.
Take-Two’s Reasons for the Combination and Recommendation of the Take-Two Board of Directors
At a meeting of the Take-Two board of directors held on January 9, 2022, the Take-Two board of directors unanimously: (a) determined that the combination and the issuance of shares of Take-Two common stock in the combination as contemplated by the merger agreement, on the terms and subject to the conditions set forth in the merger agreement, are advisable and fair to, and in the best interests of, Take-Two and its stockholders; (b) authorized and approved the execution, delivery and performance of the merger agreement by Take-Two and approved the combination and the issuance of shares of Take-Two common stock in the combination as contemplated by the merger agreement; and (c) recommended that Take-Two’s stockholders vote in favor of the Take-Two share issuance proposal and Take-Two charter amendment proposal. Accordingly, the Take-Two board of directors unanimously recommends that Take-Two’s stockholders vote “FOR” the approval of the Take-Two share issuance proposal, “FOR” the Take-Two charter amendment proposal and “FOR” the approval of the Take-Two adjournment proposal.
In evaluating the combination, the Take-Two board of directors consulted with members of Take-Two’s management team and with Take-Two’s outside legal counsel and financial advisors and, in reaching its determinations and recommendations, the Take-Two board of directors considered a number of factors.
Many of the factors considered favored the determinations and recommendations made by the Take-Two board of directors, including the following (not in any relative order of importance):
| • | the expectation that the combined company will be well-positioned to capitalize on the interactive entertainment industry’s strong tailwinds, including a leadership position in mobile; |
| • | the expectation that the combination will establish Take-Two as a leader in mobile gaming, with mobile expected to comprise over 50% of its Net Bookings in Fiscal Year 2023 (as compared to an estimated 12% in Fiscal Year 2022); |
| • | the expectation that the combination will bolster Take-Two’s mobile offerings, which include popular games such as Dragon City, Monster Legends, Top Eleven, Two Dots, and WWE SuperCard, and consist of a diverse array of titles that focus on many of the most popular genres in mobile gaming, including casual, hypercasual, lifestyle, mid-core, puzzle, social casino and sports games; |
| • | the expectation that the combination will create a powerful and diverse portfolio of industry-leading titles that span key platforms and genres across interactive entertainment; |
| • | the expectation that by sharing best practices and key data insights across the enterprise, the combined company will benefit from significant development and publishing synergies, unlock new revenue streams and reach new audiences around the world; |
| • | the expectation that the combined company will deliver a 14% compound annual growth rate for Net Bookings (excluding the annual Net Bookings opportunities and any future acquisitions) over the three fiscal year period ended March 31, 2024; |
| • | the expectation that the addition of Zynga’s mobile titles will expand Take-Two’s base of recurrent consumer spending; |
| • | the identification of at least $500 million of incremental annual Net Bookings opportunities to unlock over time, driven in part by creation of new mobile games and cross-platform experiences for many of the iconic franchises within Take-Two’s portfolio of intellectual property; |
| • | the ability to optimize recurrent consumer spending by combining resources and leveraging the collective knowledge across both companies; |
| • | the opportunity to cross-market through a larger, shared customer database and improve game economies through more effective data analytics and machine learning models; |
| • | the opportunity to use Zynga’s Chartboost advertising platform, which will improve new user acquisition through better audience targeting and optimize mobile advertising inventory to achieve greater yields; |
| • | the opportunity for geographic expansion into growth markets across Asia, including India, and the Middle East, among other regions; |
| • | the expectation of approximately $100 million of annual cost synergies within the first two years after closing, primarily driven by the rationalization of duplicative overhead including corporate general and administrative expenses and public company costs, as well as the benefit of scale efficiencies across the enterprise; |
| • | the expectation that the combination is structured to maintain a strong balance sheet, including significant annual cash generation; |
| • | the expectation that the combined company’s more diverse sources of consumer spending would help reduce volatility in revenue and operating results across reporting periods; |
| • | the expectation that the combined company’s strategic and financial flexibility will be greater than each company on a standalone basis, providing Take-Two with the financial resources to continue to invest in talent, development, and innovation, while also pursuing select inorganic growth opportunities. |
| • | the fact that, based on the number of shares of Take-Two common stock and the number of shares of Zynga common stock expected to be outstanding immediately prior to the completion of the combination, Take-Two’s stockholders are expected to own between 67.2% and 70.4% of the combined company immediately after the completion of the combination; |
| • | information and discussions with members of Take-Two’s management team and with Take-Two’s advisors regarding Zynga’s business, assets, financial condition, results of operations, reputation, current business strategy and prospects, including the projected long-term financial results of Zynga as a standalone company, the size and scale of the combined company and the expected pro forma effect of the combination on each company; |
| • | the belief that the Take-Two management team will be able to successfully integrate the two companies; |
| • | the fact that J.P. Morgan rendered its oral opinion (subsequently confirmed by delivery of its written opinion) to the Take-Two board of directors (in its capacity as such) on 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. J.P. Morgan’s written opinion is described below in the section entitled “—Opinions of Take-Two’s Financial Advisors—Opinion of J.P. Morgan Securities, LLC”; |
| • | the fact that 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 written opinion is described below in the section entitled “—Opinions of Take-Two’s Financial Advisors—Opinion of LionTree Advisors LLC;” |
| • | the review by the Take-Two board of directors with its advisors of the financial and other terms of the merger agreement, including the parties’ representations, warranties and covenants, the conditions to their respective obligations to complete the combination and the termination provisions, as well as the likelihood of the completion of the combination and the evaluation by the Take-Two board of directors of the likely time period necessary to complete the combination. The Take-Two board of directors also considered the following specific aspects of the merger agreement: |
| • | the fact that the exchange ratio has a collar and will only be adjusted to compensate for a change in the price of Take-Two common stock prior to the completion of the combination within the collar, which provides certainty to Take-Two’s stockholders as to the range of their pro forma percentage ownership of the combined company immediately after the completion of the merger (as more fully described in the section titled “The Merger Agreement—Terms of the Combination; Merger Consideration”); |
| • | the limited number and nature of the conditions to the obligation of Zynga to complete the combination, as well as the probability that those conditions would be satisfied prior the end date (as more fully described in the section titled “The Merger Agreement—Conditions to Completion of the Combination”); |
| • | the conditions to the obligations of Take-Two, Merger Sub 1 and Merger Sub 2 to complete the combination, as well as the probability that those conditions would be satisfied prior to the end date (as more fully described in the section titled “The Merger Agreement—Conditions to Completion of the Combination”); |
| • | the extensive representations and warranties made by Zynga (as more fully described in the section titled “The Merger Agreement—Representations and Warranties”), as well as the covenants in the merger agreement relating to the conduct of Zynga’s business during the period from the date of the merger agreement through the effective time (as more fully described in the section titled “The Merger Agreement—Conduct of Business”); |
| • | the fact that the merger agreement includes restrictions, subject to certain exceptions, on the ability of Zynga to 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; and Take-Two’s right to match any Zynga superior proposal (as defined below in, and as more fully described in, the section titled “The Merger Agreement—Changes in Board Recommendations”); |
| • | the ability of Take-Two to terminate the merger agreement and receive an up to $550 million termination fee from Zynga under specified circumstances (as more fully described in the section titled “The Merger Agreement—Termination Fees and Expenses; Liability for Breach”); |
| • | Take-Two’s right, under certain circumstances, prior to the approval of the Take-Two share issuance proposal or charter amendment proposal to furnish non-public information regarding Take-Two and its subsidiaries to, and to enter into discussions or negotiations with, any person or entity in response to a bona fide, written Take-Two alternative acquisition proposal (as more fully described in the section titled “The Merger Agreement—Go-Shop Period; Restrictions on Solicitations of Other Offers—Certain Definitions”); and |
| • | the right of the Take-Two board of directors, prior to the approval of the Take-Two share issuance proposal, to make a Take-Two recommendation change in connection with a Take-Two superior proposal or a Take-Two intervening event as more fully described in the section titled “The Merger Agreement—Changes in Board Recommendations.” |
In the course of its deliberations, the Take-Two board of directors also considered a variety of risks and other potentially negative factors, including the following (which are not in any relative order of importance):
| • | the risk that Zynga’s financial performance may not meet Take-Two’s expectations; |
| • | the possibility that the combination may not be completed or that completion may be unduly delayed for reasons beyond the control of Take-Two; |
| • | the possible disruption to Take-Two’s and Zynga’s respective operations that may result from the combination, including the potential for diversion of management and employee attention from other strategic opportunities or operational matters and for increased employee attrition during the period prior to completion of the combination, and the potential effect of the combination on Take-Two’s and Zynga’s respective businesses and relations with business partners, vendors and advertisers; |
| • | the adverse impact that business uncertainty pending completion of the combination could have on Take-Two’s and Zynga’s respective ability to attract, retain and motivate key personnel, and could have on Take-Two’s and Zynga’s respective ability to retain and grow its player base; |
| • | the difficulties and challenges inherent in completing the combination and integrating the businesses, operations and workforce of Zynga with those of Take-Two, and the possibility of encountering difficulties in achieving expected Net Bookings growth and cost synergies; |
| • | the risk that the anticipated strategic and other benefits to Zynga and Take-Two following completion of the combination, including the expected Net Bookings opportunities and synergies described above, will not be realized or will take longer to realize than expected; |
| • | the risk that certain Take-Two business partners that compete with Zynga, and that certain Zynga business partners that compete with Take-Two, may be more reluctant to work with or award future business to the combined company; |
| • | the risk that Take-Two stockholders may not approve the Take-Two share issuance proposal or the Take-Two charter amendment proposal or that Zynga stockholders may not approve the Zynga merger proposal; |
| • | the risk that the structure of the combination could potentially trigger termination rights of Zynga’s counterparties under, or breach certain restrictive covenants or other terms of, Zynga’s contracts with third parties; |
| • | certain terms and conditions of the merger agreement, including: |
| • | the fact that the merger agreement includes restrictions on the ability of Take-Two to 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, subject to certain exceptions (as more fully described in the section titled “The Merger Agreement—Go-Shop Period; Restrictions on Solicitations of Other Offers—Take-Two No-Shop Period”); |
| • | Zynga’s right, under specified circumstances (including during a “go shop” period), prior to the approval of the Zynga merger proposal, to furnish non-public information regarding Zynga and its subsidiaries to, and to enter into discussions or negotiations with, any person or entity in response to a bona fide, written Zynga alternative acquisition proposal (as more fully described in the section titled “The Merger Agreement—Go-Shop Period; Restrictions on Solicitations of Other Offers—Zynga No-Shop Period”); |
| • | the right of the Zynga board of directors, prior to the approval of the Zynga merger proposal, to make a Zynga recommendation change in connection with a Zynga superior proposal or a Zynga intervening event (as more fully described in the section titled “The Merger Agreement—Changes in Board Recommendations”); |
| • | the restrictions on the right of the Take-Two board of directors to make a Take-Two recommendation change, subject to certain conditions (as more fully described in the section titled “The Merger Agreement—Termination Fees and Expenses; Liability for Breach”), which could have the effect of discouraging Take-Two alternative acquisition proposals from being made or pursued; and |
| • | the requirement that Take-Two provide Zynga with an opportunity to propose revisions to the merger agreement prior to Take-Two being able to make a Take-Two recommendation change in connection with a Take-Two superior proposal or a Take-Two intervening event (as more fully described in the section titled “The Merger Agreement—Changes in Board Recommendations”); |
| • | the fact that Take-Two’s current stockholders will have reduced ownership and voting interests after the completion of the combination (compared to their current ownership and voting interests in Take-Two) and will exercise less influence over the Take-Two board of directors and management and policies of Take-Two (compared to their current influence over the Take-Two board of directors and management and policies of Take-Two); |
| • | the substantial costs to be incurred in connection with the combination, including those incurred regardless of whether the combination is completed; |
| • | the risks and contingencies relating to the announcement and pendency of the combination and the risks and costs to Take-Two if the combination is not completed on a timely basis or at all, including the impact on Take-Two’s relationships with employees, with business partners and with third parties; |
| • | the fact that if the combination is not completed, Take-Two will have expended significant human and financial resources on a failed transaction, and may also be required to pay a termination fee of $550 million under certain circumstances (as more fully described in the section titled “The Merger Agreement—Transaction Expenses and Termination Fees”); and |
| • | various other risks associated with the combination and the business of Take-Two described in the sections titled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements,” respectively. |
The factors set forth above are not intended to be exhaustive, but include many of the material factors considered by the Take-Two board of directors in approving the combination, the merger agreement, the issuance of shares of Take-Two common stock in the combination as contemplated by the merger agreement, and the Take-Two charter amendment, in authorizing the execution of the merger agreement and related transaction documents and in recommending that Take-Two’s stockholders vote in favor of the Take-Two share issuance proposal and Take-Two charter amendment proposal. In view of the wide variety of factors, both positive and negative, considered in connection with making its determinations and recommendations, and the complexity of these matters, the Take-Two board of directors did not find it practical to, and did not attempt to, quantify, rank or otherwise assign any relative or specific weights or values to any of the various factors considered in reaching its
determination to approve the Combination, the merger agreement, the issuance of shares of Take-Two common stock in the combination as contemplated by the merger agreement, the Take-Two charter amendment, and to recommend that Take-Two’s stockholders vote in favor of the Take-Two share issuance proposal and the Take-Two charter amendment proposal. The Take-Two board of directors did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to the ultimate determination of the Take-Two board of directors. In addition, individual members of the Take-Two board of directors may have given different weights to different factors. The Take-Two board of directors carefully considered all of the factors described above as a whole.
Zynga’s Reasons for the Combination and Recommendation of the Zynga Board of Directors
The Zynga board of directors unanimously: (1) determined that the merger agreement, the combination and the other transactions contemplated by the merger agreement were fair to, advisable and in the best interests of Zynga and its stockholders; (2) adopted and approved the merger agreement, the combination and the other transactions contemplated by the merger agreement; and (3) recommended that Zynga stockholders adopt the merger agreement. Accordingly, the Zynga board of directors unanimously recommends that Zynga stockholders vote “FOR” the Zynga merger proposal, “FOR” the Zynga compensation proposal, and “FOR” the Zynga adjournment proposal.
As described in the section titled “—Background of the Combination,” in evaluating the merger agreement and the transactions contemplated thereby, including the combination, the Zynga board of directors held a number of meetings and consulted Zynga management and Zynga’s outside legal and financial advisors. In reaching its decision to approve the merger agreement and to recommend that Zynga stockholders vote to adopt the merger agreement, the Zynga board of directors considered a number of factors, including, but not limited to the following (which are not necessarily presented in order of their relative importance to the Zynga board of directors), and concluded that entering into the merger agreement with Take-Two was advisable and in the best interests of Zynga and its stockholders.
| • | Strategic Rationale of the Combination. The strategic and business rationale of the combination and related opportunities for value creation for stockholders, employees, players and partners. Among the potential benefits identified by the Zynga board of directors were: |
| • | the opportunity to combine two successful, complementary businesses with leadership positions in console, PC and mobile gaming and create a diverse portfolio of titles and services that span key platforms and genres across interactive entertainment; |
| • | the opportunity to combine each company’s intellectual property and capabilities in game development, publishing and commercialization to expand the combined company’s offerings and player base and enhance player experience, choice and retention; |
| • | the expectation that the combined company’s more diverse sources of consumer spending would help reduce volatility in revenue and operating results across reporting periods; |
| • | the importance of scale in the highly competitive and consolidating interactive entertainment industry, and the potential for the combination to strengthen the combined company’s competitive positioning and financial flexibility to continue investment in talent, development, and innovation while also pursuing inorganic growth opportunities; |
| • | the potential for consumer acquisition synergies and cross-marketing opportunities to user communities generated from the combined company’s diversified and expanded player base, portfolio of titles, platform capabilities and geographical reach; |
| • | the Zynga board of directors’ view, based on discussions with Zynga management, of the ability of Take-Two management to successfully integrate and combine the respective businesses of Zynga and Take-Two; |
| • | discussions with Zynga’s management and Zynga’s advisors regarding the business, operations, strategy and future prospects of Take-Two and the combined company, including the results of Zynga’s reverse due diligence review of Take-Two; |
| • | the expectation that the combined company could achieve at least $500 million of incremental annual Net Bookings opportunities over time and approximately $100 million of annual cost synergies within the first two years after closing, and that Zynga stockholders will be able to participate in the benefits of such potential synergies as stockholders of the combined company; and |
| • | other strategic benefits and opportunities for innovation that could be achieved through the sharing of Zynga’s and Take-Two’s technology, employee talent and data analytics. |
| • | Financial Condition, Results of Operations and Prospects of Zynga; Risks of Execution. The current, historical and projected financial condition, results of operations and business of Zynga, as well as Zynga’s prospects and risks if it were to remain an independent company. In particular, the Zynga board of directors considered the Zynga long-range plan (as summarized in the section titled—“Zynga Unaudited Prospective Financial Information”). As part of this, the Zynga board of directors considered the potential opportunities that the Zynga long-range plan presented against, among other things, various execution and other risks to achieving the Zynga long-range plan and related uncertainties, including Zynga’s ability to continue to launch, innovate, enhance and successfully monetize games and grow its player base and the impact of industry, player, competitive and regulatory trends on Zynga and its business. The Zynga board of directors noted that Zynga’s bookings, revenue, player metrics and operating results have fluctuated in the past and could vary significantly from quarter-to-quarter and year-to-year in the future because of a variety of factors, including those described in the “risk factors” set forth in Zynga’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and subsequent reports filed with the SEC. |
| • | Value to Zynga Stockholders. The belief of the Zynga board of directors that the merger consideration represents the best value reasonably obtainable for the shares of Zynga common stock, taking into account business, competitive, industry and market risks and the Zynga board of directors’ familiarity with the business, operations, prospects, business strategy, financial condition and results of Zynga on a historical and prospective basis. In addition, the Zynga board of directors believed that, considering the execution and other risks to achieving the Zynga Long-Range Plan and the strategic rationale of the combination, the merger consideration reflects a fair and favorable price for the shares of Zynga common stock. In this regard, the Zynga board of directors considered, among other things: |
| • | various analyses as to the valuation of Zynga as an independent company; |
| • | the implied value of the consideration to be received by Zynga stockholders in the combination (using the closing price of Take-Two common stock on January 7, 2022, the last trading day before the announcement of the combination, of $164.60 as the Take-Two common stock price for purposes of calculating the exchange ratio) represented: |
| • | a premium of approximately 64% to closing price of Zynga common stock on January 7, 2022; and |
| • | multiples of approximately 4.0x to Zynga’s estimated Bookings for Zynga’s fiscal year 2022 and approximately 18.2x to Zynga’s estimated Adjusted EBITDA for Zynga’s fiscal year 2022 (which estimated amounts were included in the Zynga standalone projections, as described further in the section of this joint proxy statement/prospectus titled “Zynga Unaudited Prospective Financial Information”). |
| • | the historic trading ranges of Zynga common stock and Take-Two common stock; |
| • | the merger consideration was the result of extensive negotiation between the parties overseen for Zynga by the Strategic Committee composed of independent members of the Zynga board |
| of directors, and the Zynga board of directors belief that the merger consideration represented the best value that Zynga could reasonably obtain from Take-Two; |
| • | the fact that a substantial portion of the merger consideration consists of Take-Two common stock, which provides Zynga stockholders with participation in the upside potential of a larger, more diversified company. The Zynga board of directors also considered the significant cash portion of the merger consideration, which provides Zynga stockholders with certainty of value and liquidity upon completion of the combination for such portion of the merger consideration; |
| • | the fact that the stock portion of the merger consideration is based upon a floating exchange ratio and subject to a $156.50 to $181.88 collar range, which provides additional certainty and stability to the stock portion of the consideration to be delivered to Zynga stockholders; |
| • | the possibility that the value of the merger consideration payable to Zynga stockholders could increase if the price of Take-Two common stock increases above the high end of the collar of $181.88 prior to completion of the combination; and |
| • | the expected treatment of the combination as a tax-free reorganization under Section 368(a) of the Code for U.S. federal income tax purposes, as more fully described in the section titled “U.S. Federal Income Tax Consequences of the Combination.” |
| • | Permitted Solicitation of Alternative Acquisition Proposals. The merger agreement permitted Zynga and its representatives, at the direction of the Zynga board of directors, during the go-shop period, to (1) initiate, solicit, propose, induce or encourage any alternative acquisition proposals from third parties; (2) provide nonpublic information to third parties; and (3) participate in discussions and negotiations with third parties regarding alternative acquisition proposals. |
| • | Potential Strategic Alternatives. The assessment of the Zynga board of directors that none of the possible alternatives to the combination (including the possibility of continuing to operate Zynga as an independent company or pursuing a different transaction, and the desirability and perceived risks of those alternatives, as well as the potential benefits and risks to Zynga’s stockholders of those alternatives and the timing and likelihood of effecting such alternatives) was reasonably likely to present superior opportunities for Zynga to create greater value for Zynga stockholders, taking into account execution risks as well as business, industry, player, competitive and regulatory risks. In this regard, the Zynga board of directors considered the fact that Party A, the party that the Zynga board of directors thought most likely to be able to complete an acquisition of Zynga on an appropriate timeline, decided not to submit a proposal to acquire Zynga prior but would (together with other potentially interested acquirors) be able to fully evaluate and make an alternative acquisition proposal during the go-shop period. |
| • | Opinion of Goldman Sachs. The opinion, dated January 9, 2022, of Goldman Sachs to the Zynga board of directors as to the fairness, from a financial point of view and as of such date, of 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), which opinion was based on and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations on the review undertaken as set forth in such opinion attached as Annex D to this joint proxy statement/prospectus and more fully described in the section titled “—Opinion of Zynga’s Financial Advisor.” |
| • | Terms of the Merger Agreement. The terms of the merger agreement, which was the product of arms’-length negotiations overseen for Zynga by the Strategic Committee composed of independent members of the Zynga board of directors, and the belief of the Zynga board of directors that the merger agreement contained terms and conditions that are, in the Zynga board of directors’ view, favorable to Zynga and its stockholders. The factors considered included: |
| • | Zynga’s ability, under certain circumstances, to furnish information to, and conduct negotiations with, third parties regarding acquisition proposals, including after the no-shop period start date; |
| • | the Zynga board of directors’ ability, under certain circumstances, to withdraw or modify its recommendation that Zynga stockholders vote in favor of the adoption of the merger agreement; |
| • | the Zynga board of directors’ ability, under certain circumstances, to terminate the merger agreement to enter into an alternative acquisition agreement. In that regard, the Zynga board of directors believed that the termination fee payable by Zynga in such instance was reasonable, consistent with similar fees payable in comparable transactions, and not preclusive of other offers; |
| • | Take-Two’s agreement to appoint to the Take-Two board of directors two of Zynga’s current directors, designated by Zynga and approved by Take-Two, in connection with the completion of the combination; |
| • | the limited conditions to Take-Two’s obligation to consummate the combination; |
| • | the consummation of the combination not being subject to a financing condition; |
| • | Zynga’s ability to specifically enforce Take-Two’s obligations under the merger agreement, including Take-Two’s obligations to complete the combination; |
| • | the likelihood that Take-Two would complete the combination taking into account (1) the committed debt financing Take-Two obtained in connection with the combination and Take-Two’s financial condition and ability to fund the cash portion of the merger consideration; and (2) the commitment by Take-Two to obtain applicable consents and approvals under antitrust laws and assume the risks related to certain conditions and requirements that may be imposed by regulators in connection with securing such consents and approvals up to specified thresholds and limitations; |
| • | the limited circumstances in which the Take-Two board of directors may change its recommendation that Take-Two stockholders approve the Take-Two share issuance proposal and the Take-Two charter amendment proposal; and |
| • | the requirement that Take-Two pay Zynga a $550 million termination fee in certain circumstances. |
| • | Appraisal Rights. The appraisal rights in connection with the combination available to Zynga stockholders who timely and properly exercise such appraisal rights under the DGCL if certain conditions are met. |
The Zynga board of directors also considered uncertainties and risks and other potentially negative factors related to the combination, including the following:
| • | Potential Decrease in the Value of the Merger Consideration. The value of the stock portion of the merger consideration payable to Zynga stockholders could decrease if the price of Take-Two common stock decreases below $156.50 (the low end of the collar) prior to completion of the combination; |
| • | Combination and Integration Risks. The risk that the combined company will not realize all of the anticipated strategic and other benefits of the merger, including the possibility that Take-Two’s |
| financial performance may not meet Zynga’s expectations and that the expected synergies may not be realized or will cost more to achieve than anticipated. In this regard, the Zynga board of directors was aware of the challenges inherent in completing the combination and integrating the businesses, operations and workforces of Zynga and Take-Two, and that this process could take longer than expected and might ultimately be unsuccessful; |
| • | Effects of the Announcement of the Combination. The effects of the public announcement of the combination, including the: (1) effects on Zynga’s employees, business partners, players, operating results; (2) potential effects on the stock price of Take-Two and Zynga; (3) impact on Zynga’s ability to attract and retain key employees, including game development and launch talent; and (4) potential for litigation in connection with the combination; |
| • | Need to Obtain Required Stockholder Approvals. The possibility that Zynga stockholders may not approve the adoption of the merger agreement at the Zynga special meeting or that Take-Two stockholders may not approve the Take-Two share issuance proposal or the Take-Two charter amendment proposal at the Take-Two special meeting; |
| • | Need to Obtain Required Regulatory Clearances. Completion of the combination would require approval, or expiration or termination of the applicable waiting periods, under the HSR Act and other applicable non-U.S. antitrust laws. In this regard, the Zynga board of directors considered the risk that regulatory agencies may not approve the combination or may impose terms and conditions on their approvals that exceed the thresholds and limitations that Take-Two agreed to in the merger agreement, or that would otherwise adversely affect the business and financial results of the combined company, and the amount of time that might be required to obtain all required regulatory consents and approvals; |
| • | Take-Two’s Ability to Consider Alternative Transactions. The risk related to Take-Two’s right, subject to certain conditions, to respond to and negotiate with respect to certain acquisition proposals from third parties, and the related possibility that the Take-Two board of directors might withdraw its recommendation in favor of the Take-Two share issuance proposal or the Take-Two charter amendment proposal; |
| • | Restrictions on Zynga’s Ability to Solicit Alternative Transactions. The restrictions in the merger agreement on Zynga’s ability to solicit alternative acquisition proposals after the go-shop period (subject to certain exceptions to allow the Zynga board of directors to exercise its fiduciary duties and to accept a superior proposal, and then only upon the payment of a termination fee); |
| • | Termination Fee Payable by Zynga. The requirement that Zynga pay Take-Two a termination fee under certain circumstances following termination of the merger agreement, including if the Zynga board of directors terminates the merger agreement to accept a superior proposal. The Zynga board of directors considered the potentially discouraging impact that this termination fee could have on a third party’s interest in making a competing proposal to acquire Zynga; |
| • | Expense Reimbursement by Zynga. The requirement that Zynga reimburse $50 million of Take-Two’s expenses if the merger agreement is terminated by either party in certain circumstances following the failure of Zynga stockholders to approve the adoption of the merger agreement at the Zynga special meeting; |
| • | Risk Associated with Failure to Consummate the Combination. The possibility that the combination might not be consummated, and if it is not consummated, that: (1) Zynga’s directors, senior management and other employees will have expended extensive time and effort and will have experienced significant distractions from their work on behalf of Zynga during the pendency of the combination; (2) Zynga will have incurred significant transaction and other costs; (3) Zynga’s continuing business relationships with employees, business partners and players may be adversely affected; (4) the trading price of Zynga common stock could be adversely affected; (5) the termination fee payable by Take-Two to Zynga will not be available in all instances in which the merger agreement is terminated and such termination fee may not be sufficient to compensate Zynga for the damage |
