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Zynga Snaps Up Peak For $1.8B In Its Largest Deal To Date; Shares Up 7%

support@smarteranalyst.com (Ben Mahaney)

Social game developer Zynga (ZNGA) has announced that it has entered into a definitive agreement to acquire Peak, one of the most globally successful mobile gaming companies, for $1.8 billion. Shares are rising 7% in Monday’s pre-market trading.

Istanbul-based Peak brings two Forever Franchises to Zynga, Toon Blast and Toy Blast, that have consistently ranked in the top 10 and top 20 U.S. iPhone grossing games for over two years, respectively. Indeed, Peak is expected to grow Zynga’s average mobile DAUs by more than 60% while strengthening the company’s international audience.

“Peak is one of the world’s best puzzle game makers and we could not be more excited… With the addition of Toon Blast and Toy Blast, we are expanding our live services portfolio to eight forever franchises, meaningfully increasing our global audience base and adding to our exciting new game pipeline” cheered Zynga CEO Frank Gibeau.

Zynga will acquire 100% of Peak for $1.8 billion, with $900 million in cash and $900 million of Zynga common stock (issued at the volume-weighted average closing price per share over the thirty-day trading period ended May 29, 2020). The deal is expected to close in the third quarter of 2020.

At the same time, based on strength across its live services portfolio, Zynga updated its Q2 and Full Year 2020 financial guidance (without including any contributions from Peak).

The company now anticipates Q2 revenue of $430M vs. $400M previously, with bookings of $500M vs. $460M previously and $465M consensus. Adjusted EBITDA is now expected at $35M up from the prior guidance of $32M.

Shares in Zynga have exploded by 49% year-to-date. As a result, the average analyst price target of $8 now indicates downside potential of 9%. Analysts have a cautiously optimistic Moderate Buy consensus on Zynga, with 9 recent buy ratings offset by two hold ratings and two sell ratings. (See ZNGA stock analysis on TipRanks).

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