Merger Arbitrage Mondays – Take-Two Acquires Zynga

  • January 17, 2022

Merger activity remained steady last week with two new deals announced and one active deal completed.

The largest game company acquisition in history was announced last week. In 2018, Bloomberg reported that, Zynga (ZNGA), the firm that created FarmVille and Words With Friends, had attracted takeover interest from other game developers amid a jump in dealmaking in the industry. ZNGA’s price after that report was $4.36.

Zynga has had a tumultuous decade with success in the early days of Facebook driving growth in FarmVille and then a subsequent slump that saw its founder and CEO Mark Pincus step down from the CEO role twice. It is interesting that the two San Francisco based mobile gaming companies I used to follow, Glu Mobile and Zynga, have both been acquired during the last year.

Zynga entered into a definitive merger agreement to be acquired by Take-Two (TTWO), owner of popular franchises like Grand Theft Auto, NBA 2K, and Red Dead Redemption. With this $12.7 billion acquisition, Take-Two plans to significantly accelerate and scale up its mobile gaming business. In recent months, gaming studios have been revealing plans to add NFTs to their games. The digital assets that are verified by blockchain technology, give proof of authenticity and ownership to gamers.

(Source: Company Q3 2021 Investor Presentation)

We have classified TTWO’s acquisition of ZNGA as a ‘special conditions’ deal based on the collar mechanism mentioned below in the deal terms. Zynga stockholders will receive $3.50 in cash and $6.36 in shares of Take-Two common stock for each share of Zynga common stock outstanding at the closing.

According to the merger agreement, Take-Two’s acquisition proposal for Zynga includes a “go-shop” period that will allow Zynga to shop around for a better transaction with a different company over a period of 45 days. Take-Two’s proposal represents a 64% premium on Zynga’s share price and Zynga would have to pay a termination fee of $50 million if it signs with a different company. We have seen several bidding wars in recent months and it will be interesting to see if someone like EA, who closed its acquisition of Glu Mobile last May, might attempt to step in with a competitive offer. If the deal goes through, we could potentially see gamers playing GTA on mobile.

You can find all the active deals listed below in our Merger Arbitrage Tool (MAT) that automatically updates itself during market hours.

There were three new deals announced in the Deals in the Works section last week.

SPAC Arbitrage

SPAC activity increased with seven new SPAC IPOs filed. There was one new SPAC combinations announced last week. You can find the new SPAC IPO announcements in our SPACs tool here.

  1. Suneva Medical, an innovative medical technology company using regenerative medicine to change the standard of care in aesthetic treatments and Viveon Health Acquisition Corp. (VHAQ) announced that they have entered into a definitive merger agreement.

Weekly Spread Changes:

The table below shows weekly spread changes between January 7 and January 15, 2022.

Company Quote
Last Week
Spread Change
CSPR5.4Durational Capital Management LP (N/A)27.78%3.29%24.49%All Cash
MNTV17.77Zendesk (ZEN)100.4127.14%10.82%16.32%All Stock
AJRD42.98Lockheed Martin Corporation (LMT)363.2518.66%14.79%3.87%All Cash
CHNG20.58UnitedHealth Group Incorporated (UNH)468.6925.12%22.04%3.08%All Cash
TMX42.73Rentokil Initial plc (RTOKY)35.9928.72%26.23%2.49%Special Conditions
PTRS10.53OceanFirst Financial Corp. (OCFC)24.04-1.42%0.00%-1.42%Special Conditions
MIME80.36Permira (N/A)-0.45%1.14%-1.59%All Cash
FVCB20.435Blue Ridge Bankshares, Inc. (BRBS)18.252.63%4.29%-1.66%All Stock
AZPN155.92Emerson Electric Co. (EMR)97.472.62%8.52%-5.90%Special Conditions
JOBS49.58Garnet Faith Limited (N/A)59.44%74.16%-14.72%All Cash

Deal Statistics:

Total Number of Deals Closed in 20227
Total Number of Pending Deals
Cash Deals44
Stock Deals24
Stock & Cash Deals7
Special Conditions7
Total Number of Pending Deals82
Total Deal Size$475.18 billion

New Deals:

  1. The acquisition of Apria (APR) by Owens & Minor (OMI) for $1.62 billion or $37.50 per share in cash.
  2. The acquisition of Zynga (ZNGA) by Take-Two Interactive Software (TTWO) for $12.7 billion in a cash plus stock deal. Under the terms of the agreement, Zynga stockholders will receive $3.50 in cash and $6.361 in shares of Take-Two common stock for each share of Zynga common stock outstanding at the closing. The transaction is valued at $9.861 per share of Zynga common stock. The transaction includes a collar mechanism on the equity consideration, so that if Take-Two’s 20-day volume weighted average price (“VWAP”) ending on the third trading day prior to closing is in a range from $156.50 to $181.88, the exchange ratio would be adjusted to deliver total consideration value of $9.86 per Zynga share (including $6.36 of equity value based on that VWAP and $3.50 in cash). If the VWAP exceeds the higher end of that range, the exchange ratio would be 0.0350 per share, and if the VWAP falls below the lower end of that range, the exchange ratio would be 0.0406 per share.

Deal Updates:

  1. On January 12, 2022, Microsoft’s (MSFT) planned acquisition of Nuance Communications (NUANis being formally investigated by the U.K. Competition and Markets Authority to determine whether it will hamper competition in the U.K. The deadline for the CMA to announce its decision whether to refer the Merger for a Phase 2 investigation is therefore March 9, 2022.
  2. On January 12, 2022, 51job (JOBS) announced that its Board of Directors received a proposal letter from Garnet Faith Limited in connection with the proposed merger. In the Proposal Letter, the Merger Sub proposed to reduce the merger consideration from US$79.05 in cash per common share to US$57.25 in cash per common share.
  3. On January 12, 2022, Marlin Business Services (MRLN) announced an update on its proposed merger with HPS Investment Partners. Marlin has now satisfied the De-Banking Condition and the parties intend to consummate the merger prior to the market open on Thursday, January 20, 2022.
  4. On January 13, 2022, Proofpoint offered to buy Mimecast (MIME) for $92.50 per share. Mimecast rejected the offer as it believed a transaction may have too many potential antitrust issues.
  5. On January 13, 2022, Santander Holdings USA announced that it has extended the expiration date of its previously announced tender offer to acquire all outstanding shares of common stock of Santander Consumer USA Holdings (SC). The Tender Offer is now scheduled to expire on January 20, 2022.

Closed Deals:

  1. The acquisition of Teekay LNG Partners (TGP) by Stonepeak on January 13, 2022. It took 100 days for this deal to be completed.

Top 10 deals with largest spreads:

JOBS06/21/2021Garnet Faith Limited (N/A)$79.05$49.5803/31/202259.44%293.18%
TMX12/14/2021Rentokil Initial plc (RTOKY)$55.00$42.7312/31/202228.72%30.03%
CSPR11/15/2021Durational Capital Management LP (N/A)$6.90$5.403/31/202227.78%137.01%
MNTV10/28/2021Zendesk (ZEN)$22.59$17.7706/30/202227.14%60.03%
CHNG01/06/2021UnitedHealth Group Incorporated (UNH)$25.75$20.5806/30/202225.12%55.57%
XLNX10/27/2020Advanced Micro Devices, Inc. (AMD)$235.90$198.4503/31/202218.87%93.08%
AJRD12/20/2020Lockheed Martin Corporation (LMT)$51.00$42.9803/31/202218.66%92.04%
BRG12/20/2021Blackstone Real Estate (N/A)$29.85$26.5306/30/202212.51%27.68%
ZNGA01/10/2022Take-Two Interactive Software, Inc. (TTWO)$9.86$8.9606/30/202210.04%22.22%
COHR03/25/2021II-VI Incorporated (IIVI)$284.66$259.6501/31/20229.63%234.34%

List of all pending deals:

The list of all pending deals is only available to InsideArbitrage Premium and Plus members.

Target VolumeEstimated
Closing Date
+JOBS6/21/21Garnet Faith Limited (N/A)All Cash$3.63 B$79.05$49.58451,1763/31/2259.44%297.20%
+TMX12/14/21Rentokil Initial plc (RTOKY)Special Conditions$6.7 B$55.00$42.73992,25712/31/2228.72%30.12%
+CSPR11/15/21Durational Capital Management LP (N/A)All Cash$318.49 M$6.90$5.45,584,4483/31/2227.78%138.89%
+MNTV10/28/21Zendesk (ZEN)All Stock$4.21 B$22.59$17.77889,9936/30/2227.14%60.40%
+CHNG1/06/21UnitedHealth Group Incorporated (UNH)All Cash$13.28 B$25.75$20.583,163,5246/30/2225.12%55.91%
+XLNX10/27/20Advanced Micro Devices, Inc. (AMD)All Stock$33.43 B$235.90$198.451,572,3933/31/2218.87%94.35%
+AJRD12/20/20Lockheed Martin Corporation (LMT)All Cash$3.79 B$51.00$42.981,184,9303/31/2218.66%93.30%
+BRG12/20/21Blackstone Real Estate (N/A)Special Conditions$3.6 B$29.85$26.53277,4946/30/2212.51%27.85%
+ZNGA1/10/22Take-Two Interactive Software, Inc. (TTWO)Special Conditions$12.7 B$9.86$8.9648,577,1426/30/2210.04%22.36%
+COHR3/25/21II-VI Incorporated (IIVI)Cash Plus Stock$6.84 B$284.66$259.65281,0921/31/229.63%251.08%
+PNM10/21/20Avangrid, Inc. (AGR)All Cash$8.05 B$50.30$46.131,033,3826/30/229.04%20.12%
+ARNA12/13/21Pfizer Inc. (PFE)All Cash$4.69 B$100.00$92.651,368,9386/30/227.93%17.66%
+NFH8/04/21Unicorn II Holdings Limited (N/A)All Cash$2.09 billion$12.00$11.12274,5361/31/227.91%206.32%
+SJR3/15/21Rogers Communications Inc. (RCI)Special Conditions$26 B$32.40$30.17186,5156/30/227.39%16.45%
+SAFM8/09/21Cargill and Continental Grain Company (N/A)All Cash$4.49 B$203.00$189.3986,7741/31/227.19%187.36%
+NPTN11/04/21Lumentum Holdings Inc. (LITE)All Cash$745.24 M$16.00$15.11775,43912/31/225.89%6.18%
+STXB11/19/21Simmons First National Corporation (SFNC)All Stock$581 M$32.55$30.9744,7916/30/225.10%11.34%
+VNE10/04/21Qualcomm Incorporated (QCOM)All Cash$3.87 B$37.00$35.471,353,9976/30/224.31%9.60%
+ISBC7/28/21Citizens Financial Group, Inc. (CFG)Cash Plus Stock$3.5 B$18.20$17.452,789,3816/30/224.27%9.51%
+UMPQ10/12/21Columbia Banking System, Inc. (COLB)All Stock$4.5 B$22.01$21.161,636,4366/30/224.04%8.99%
+XENT8/06/21Medtronic plc (MDT)All Cash$1.1 billion$28.25$27.23124,4263/31/223.75%18.73%
+CERN12/20/21Oracle Corporation (ORCL)All Cash$28.4 B$95.00$92.214,672,66312/31/223.03%3.17%
+CCMP12/15/21Entegris, Inc. (ENTG)Cash Plus Stock$6.5 B$193.21$187.65348,99512/31/222.96%3.11%
+FVCB7/14/21Blue Ridge Bankshares, Inc. (BRBS)All Stock$113.36 M$20.97$20.43577,9511/31/222.63%68.63%
+AZPN10/11/21Emerson Electric Co. (EMR)Special Conditions$12.34 B$160.00$155.92543,5436/30/222.62%5.82%
+KOR9/13/21AngloGold Ashanti Limited (AU)All Cash$450 M$3.29$3.21117,7393/31/222.49%12.46%
+TSC10/20/21Raymond James Financial, Inc. (RJF)Cash Plus Stock$1.1 B$33.11$32.32150,0406/30/222.44%5.44%
+LEVL11/04/21First Merchants Corporation (FRME)Cash Plus Stock$323.5 M$42.98$4241,9886/30/222.33%5.20%
+FBC4/26/21New York Community Bancorp, Inc. (NYCB)All Stock$2.6 B$53.24$52.05332,5043/31/222.29%11.43%
+PBCT2/22/21M&T Bank Corporation (MTB)All Stock$7.6 B$21.87$21.424,257,2853/31/222.10%10.51%
+FOE5/11/21Prince International Corporation (N/A)All Cash$2.1 B$22.00$21.66235,3893/31/221.57%7.85%
+GSS11/01/21Chifeng Jilong Gold Mining Co., Ltd. (N/A)All Cash$470 M$3.91$3.85216,1081/31/221.56%40.63%
+ROG11/02/21DuPont de Nemours, Inc. (DD)All Cash$5.2 B$277.00$273.36178,0456/30/221.33%2.96%
+ESBK10/04/21Community Bank System, Inc. (CBU)All Cash$82.8 M$23.10$22.82103/31/221.32%6.58%
+CONE11/15/21KKR and Global Infrastructure Partners (N/A)All Cash$15 B$90.50$89.343,432,0306/30/221.30%2.89%
+MILE11/08/21Lemonade (LMND)All Stock$201.47 M$1.85$1.834,442,3716/30/221.23%2.75%
+NUAN4/12/21Microsoft Corp (MSFT)All Cash$19.7 B$56.00$55.363,243,5883/31/221.16%5.78%
+EPAY12/17/21Thoma Bravo (N/A)All Cash$2.6 B$57.00$56.362,197,5816/30/221.14%2.53%
+ATC7/01/21MKS Instruments, Inc. (MKSI)Cash Plus Stock$6.5 B$26.17$25.9454,3243/31/221.06%5.29%
+OCDX12/23/21Quidel Corporation (QDEL)Cash Plus Stock$8.33 B$19.26$19.061,094,4006/30/221.05%2.33%
+GTS8/24/21GuideWell Mutual Holding Corporation (N/A)All Cash$665.93 M$36.00$35.6450,7376/30/221.01%2.25%
+FLOW12/13/21Lone Star Funds (N/A)All Cash$3.8 B$86.50$85.67385,3926/30/220.97%2.16%
+KL9/28/21Agnico Eagle Mines Limited (AEM)All Stock$9.53 B$40.79$40.411,663,3003/31/220.95%4.75%
+MGP8/04/21VICI Properties Inc. (VICI)All Stock$17.2 billion$38.99$38.621,139,0846/30/220.95%2.11%
+MCFE11/08/21Investor Group comprised of Advent, Permira, Crosspoint Capital, CPP Investments, GIC and ADIA (N/A)All Cash$14 B$26.00$25.762,412,3136/30/220.93%2.07%
+VG11/22/21Ericsson (ERIC)All Cash$6.2 B$21.00$20.822,380,6466/30/220.86%1.92%
+WBT7/14/21Ali Holding S.r.l. (N/A)All Cash$4.8 B$24.00$23.8894,4861/31/220.84%21.91%
+GSKY9/15/21The Goldman Sachs Group (GS)All Stock$2.24 B$11.43$11.34680,3413/31/220.78%3.89%
+INFO11/30/20S&P Global (SPGI)All Stock$44 B$122.70$121.772,615,6246/30/220.77%1.71%
+VRS12/19/21BillerudKorsnäs AB (N/A)All Cash$825 M$27.00$26.8282,3576/30/220.75%1.66%
+OMP10/26/21Crestwood Equity Partners LP (CEQP)All Stock$1.8 B$25.61$25.4384,7821/31/220.72%18.74%
+GWB9/16/21First Interstate BancSystem, Inc. (FIBK)All Stock$2 B$37.31$37.05236,2233/31/220.69%3.45%
+ANAT8/09/21Brookfield Asset Management Reinsurance Partners Ltd. (BAMR)All Cash$5.1 B$190.00$188.7332,1566/30/220.67%1.50%
+FTSI10/22/21ProFrac Holdings (N/A)All Cash$407.5 M$26.52$26.3556,9133/31/220.65%3.23%
+FMBI6/01/21Old National Bancorp (ONB)All Stock$2.86 B$22.69$22.55685,1981/31/220.64%16.73%
+PAE10/25/21Amentum Government Services Holdings LLC (N/A)All Cash$1.9 B$10.05$9.99923,1773/31/220.60%3.00%
+FRTA2/22/21Quikrete Holdings, Inc. (N/A)All Cash$2.74 B$24.00$23.87217,5783/31/220.54%2.72%
+APR1/10/22Owens & Minor, Inc. (OMI)All Cash$1.62 B$37.50$37.3965,8806/30/220.54%1.19%
+CSLT1/05/22Vera Whole Health (N/A)All Cash$261.35 M$2.05$2.042,360,1213/31/220.49%2.45%
+MNR11/05/21Industrial Logistics Properties Trust (ILPT)All Cash$3.72 B$21.00$20.91539,1366/30/220.43%0.96%
+DWSN10/25/21Wilks Brothers, LLC (N/A)All Cash$18.56 M$2.34$2.3322,9173/31/220.43%2.15%
+KRA9/27/21DL Chemical Co., Ltd. (N/A)All Cash$2.5 B$46.50$46.32180,7236/30/220.39%0.86%
+STFC7/12/21Liberty Mutual Holding Company Inc. (N/A)All Cash$2.48 B$52.00$51.865,1783/31/220.39%1.93%
+IHC11/09/21Geneve Holdings, Inc. (N/A)All Cash$813.9 M$57.00$56.7921,9553/31/220.37%1.85%
+VCRA1/06/22Stryker (SYK)All Cash$3.09 B$79.25$78.963,740,3613/31/220.37%1.84%
+ACBI7/23/21SouthState Corporation (SSB)All Stock$542 M$33.53$33.4173,6273/31/220.36%1.80%
+GCP12/06/21Saint-Gobain (N/A)All Cash$2.3 B$32.00$31.9384,20012/31/220.31%0.33%
+GNOG8/09/21DraftKings Inc. (DKNG)All Stock$1.52 B$8.46$8.44702,8483/31/220.29%1.44%
+HBMD7/13/21F.N.B. Corporation (FNB)All Stock$418 M$25.18$25.12104,1891/31/220.25%6.43%
+TACO12/06/21Jack in the Box Inc. (JACK)All Cash$575 M$12.51$12.48925,3073/31/220.24%1.20%
+STL4/19/21Webster Financial Corporation (WBS)All Stock$5.12 B$29.71$29.641,157,5362/01/220.24%5.81%
+MRLN4/19/21HPS Investment Partners LLC (N/A)All Cash$109.4 M$23.50$23.5418,0381/20/220.00%0.00%
+BPMP12/20/21BP p.l.c. (BP)All Stock$2.45 B$18.42$18.43420,3133/31/22-0.04%-0.19%
+ABTX11/10/21CBTX, Inc. (CBTX)All Stock$1.5 B$44.98$4553,5216/30/22-0.05%-0.11%
+CPLG11/08/21Highgate and Cerberus Capital Management, L.P. (N/A)Special Conditions$1.5 B$15.65$15.681,119,9233/31/22-0.19%-0.96%
+PSXP10/27/21Phillips 66 (PSX)All Stock$14.5 B$44.29$44.38397,9343/31/22-0.20%-1.01%
+PVG11/09/21Newcrest Mining Limited (NCMGY)All Stock$2.8 B$14.36$14.391,657,0363/31/22-0.21%-1.03%
+SC8/24/21Santander Holdings USA, Inc. (N/A)All Cash$12.7 B$41.50$41.66166,8713/31/22-0.38%-1.92%
+MIME12/07/21Permira (N/A)All Cash$5.8 B$80.00$80.362,874,4796/30/22-0.45%-1.00%
+PTRS11/04/21OceanFirst Financial Corp. (OCFC)Special Conditions$186 M$10.38$10.533,4286/30/22-1.42%-3.17%
+RRD12/14/21Chatham Asset Management, LLC (N/A)All Cash$2.3 B$10.85$11.231,307,2586/30/22-3.38%-7.53%
+NES12/13/21Select Energy Services, Inc. (WTTR)All Stock$45 M$1.73$2.2700395,3953/31/22-23.58%-117.91%


SPAC activity increased a little last week but the business combinations were still low. We wrote the following about SPACs in our mid-month update:

We track SPAC IPOs and business combinations on Inside Arbitrage here and here. A couple of weeks ago, I decided to download the list of all completed business combinations to see how they had performed after they had merged with an operating company. I suspected that given the bubble in various asset classes and a dwindling supply of high quality private business to acquire, the post-merger performance was probably not good.

I was completely surprised by the results. Performance was significantly worse than I expected. The group of 159 post-merger SPACs I looked at collectively lost more than 36% and only 12 out of the 159 had positive returns. I was aware that my (Twitter) friend Ross Greenspan had written a paper on the history of SPACs and I reached to him to see if I could get a copy. His paper titled Money for Nothing, Shares for Free: A Brief History of the SPAC is a fascinating read. I was not aware that both Burger King and American Apparel had gone public through SPACs. More importantly, I noticed on page 24 that the results I was seeing from analyzing Inside Arbitrage SPAC data were confirmed by another longer study that found “the average four-year buy-and-hold return for second-generation SPACs was a grim negative 51.9%”.

Disclaimer: I have long positions in Arena Pharmaceuticals (ARNA), Bluerock Residential Growth REIT (BRG), Change Healthcare (CHNG) and Pfizer (PFE). I also have put options in Change Healthcare. Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.