8-KLeadership ChangesAcquisitions & DispositionsMaterial Agreements+5

TAKE TWO INTERACTIVE SOFTWARE INC 8-K Report, Material Agreement (May 26, 2022)

Filed May 26, 2022For Securities:TTWO

Summary

Take-Two Interactive Software, Inc. (TTWO) filed an 8-K on May 26, 2022, to report the completion of its acquisition of Zynga Inc. The acquisition, which closed on May 23, 2022, involved a merger where Zynga became a wholly-owned subsidiary of Take-Two. This transaction has significantly altered Take-Two's capital structure and business operations. The filing also details significant financing activities, including the establishment of a new $500 million unsecured five-year revolving credit facility, replacing a previous agreement. Additionally, Take-Two addressed the convertible notes issued by Zynga, outlining how these notes will be assumed by Take-Two, with conversion rights now entitling holders to a mix of Take-Two common stock and cash. These events mark a pivotal moment for Take-Two, integrating a major mobile gaming entity and establishing new credit arrangements.

Key Highlights

  • 1Completion of Zynga Acquisition: Take-Two has successfully acquired Zynga in a transaction that closed on May 23, 2022. Zynga now operates as a wholly-owned subsidiary of Take-Two.
  • 2New Credit Facility Established: A new $500 million unsecured five-year revolving credit facility was entered into, replacing the previous credit agreement. This facility includes sublimits for letters of credit and foreign currency borrowings, with an option for expansion.
  • 3Synergistic Conversion of Zynga Notes: Zynga's outstanding convertible notes (2024 and 2026 maturities) have been effectively converted. Holders now have the right to convert into a combination of Take-Two common stock and cash, reflecting the acquisition's terms.
  • 4Termination of Capped Call Transactions: Zynga entered into termination agreements for its previously established capped call transactions related to its convertible notes, with associated cash payments expected from the counterparties.
  • 5Increased Authorized Share Capital: Take-Two amended its certificate of incorporation to increase the authorized shares of common stock to 300,000,000 and preferred stock to 5,000,000 to accommodate the acquisition.
  • 6Delisting of Zynga Stock: Zynga's common stock ceased trading on the NASDAQ and was delisted effective May 23, 2022.
  • 7Board of Directors Additions: Two former Zynga directors joined the Take-Two Board of Directors following the closing of the acquisition.

Frequently Asked Questions

This 8-K filing announces the completion of Take-Two Interactive Software, Inc.'s acquisition of Zynga Inc., which officially closed on May 23, 2022. It also details related material agreements, including a new credit facility and adjustments to Zynga's convertible notes.

The acquisition significantly expands Take-Two's scale, particularly in the mobile gaming sector. Financially, it involves the issuance of approximately 46.3 million shares of Take-Two common stock to former Zynga shareholders, a new $500 million credit facility, and the assumption and modification of Zynga's outstanding convertible debt.

The new credit facility is an unsecured, five-year revolving credit facility totaling $500 million. It includes sublimits for letters of credit ($100 million) and foreign currency borrowings ($100 million). It also allows for uncommitted incremental capacity of up to $250 million or 35% of Consolidated Adjusted EBITDA. Interest rates are variable, based on the Alternate Base Rate or SOFR Rate, plus a margin determined by Take-Two's credit rating.

Zynga's 0.25% Convertible Senior Notes due 2024 and 0% Convertible Senior Notes due 2026 have had their terms modified. Following the acquisition (deemed a 'Fundamental Change'), holders have the right to convert their notes into a 'Reference Property,' which consists of 0.0406 shares of Take-Two Common Stock and $3.50 in cash per $1,000 principal amount of notes, plus cash for fractional shares. Holders also have the right to require Take-Two to repurchase their notes.