Following is the unofficial records of a CNBC exclusive interview with Take-Two Interactive Software Application, Inc (NASDAQ: TTWO) Chairman & & CEO Strauss Zelnick on CNBCs “Squawk on the Street” (M-F 9AM– 11AM ET) today, Monday, January 10th. Following is a link to video on CNBC.com:
Joining us now is Take-Twos Chairman and CEO Strauss Zelnick. STRAUSS ZELNICK: Look, this is a transformative chance for us. When you believe about EA or you believe about Activision right now, you know, in terms of what you have now done with this deal. ZELNICK: Look, weve been stating for years consisting of, including on this program, that the one burden that we could not deal with naturally in the time frame we d like to was scale and to be competitive, to deal with the most fascinating chances in the future and to deliver competitive operating margins, we required scale but it had to be a certain kind of scale. ZELNICK: Theyre fair concerns, you know, we weve gotten to know this management team over a really long duration of time so undoubtedly an extremely friendly combination and one of the essential problems was, do we fit together culturally.
DAVID FABER: Shares of Take-Two Interactive are down greatly this morning. Youve seen it. Down over 12%. This after revealing its plans to buy Zynga Inc (NASDAQ: ZNGA). Joining us now is Take-Twos Chairman and CEO Strauss Zelnick. Strauss, its fantastic to have you today. You know, your investors are seeing a bit of losses accumulate there. What do you tell them as to why this is the ideal thing for Take-Two to do?
STRAUSS ZELNICK: Look, this is a transformative chance for us. This will position Take- Two as one of the biggest publicly traded interactive home entertainment business on the planet with over 50% of our net reservations originating from the fastest growing segment in the service– mobile and free to play. It likewise positions us to grow our collection of owned copyright. One of the things that we love about Zynga resembles Take-Two, you have a multiplicity of excellent titles that they manage– lots of great titles, what they call forever franchises. We believe thats an excellent opportunity going forward. You understand, its early days? Weve just revealed this however one of things that we announced is, without regard to any earnings synergies, we anticipate the combined company to grow its leading line about 14% every year for the next 3 years through our fiscal 24. And yet, weve also identified a minimum of $500 million in yearly income run rate synergies by collaborating, by improving the quality of our collective operations, and by bringing new items to market. So we think its extraordinarily interesting.
FABER: Yeah. All right. Listen, we do see given there is a stock component here, there is in some cases a natural arbitrage in terms of some individuals shorting this stock, but its still down over almost 13%, Strauss. Not necessarily how you draw it up in the boardroom. What do you inform those investors right now and what do you think in terms of the loss of nearly 13% of your market price after your announce of a transformative offer?
ZELNICK: Look, the mathematics is the mathematics. And I believe if you solely concentrate on the stock part and the premium paid, you can comprehend the trading pattern. However, were constructing this company for the long term. Whichs always been our technique. And while one would never want to be cavalier about ones stock performance since theyre real investors who are trading, we are attempting to construct a business over a long time period and weve never paid that much attention to intraday trading marks. Weve taken notice of developing worth for our gamers, for our coworkers, and most importantly, for our investors. And thats worked out over a very long period of time and I think it will work out here.
JIM CRAMER: Now, Strauss it is Jim. Its always great to see you. Thank you for coming to our show.
ZELNICK: Thanks, Jim. Fantastic to see you.
CRAMER: Strauss, one thing I was puzzled about– this is normally a level where if you werent doing an offer, I think you d be buying a lot of stock. That the stock has gotten rather inexpensive versus where it has been.
ZELNICK: We are and we have collar around the transaction, which safeguards that of course within a variety, and we did do a buyback back recently. As you understand, we cant project around intraday movements.
CRAMER: Ok, because theres been some disagreement about how much it matters state that a person of the two Housers left at Grand Theft, Dan, that there have actually been some problems in the new Grand Theft Auto theres been a– you have constantly held this were not going to put out any game before its time. Can this ravel what many of these analysts– although you have not– but ravel a type of a longer term view that likewise includes mobile to make it so that your revenues are less episodic?
ZELNICK: Unquestionably we expect our profits to be less episodic. And we believe thatll benefit investors. And together, we think we can do a whole lot more than whats already been announced.
FABER: Strauss, you mentioned the collar. The stock is trading listed below that collar so that will have the impact of a minimum of bringing the value overall down a bit. There also is a 45 day go store, which is not necessarily normal of an offer like this. Why was that consisted of? Why is that something you consented to?
ZELNICK: Look, Zyngas board requested that. Information will be filed in the next couple of days. You understand, we are safeguarded in the event that the offer does not come our method terms of a separation factor to consider. We wished to be as friendly as possible to the celebration. Were integrating. And we think that the deal will come to fruition since we think the deal makes the a lot of sense for shareholders.
FABER: Yeah, I imply, my understanding exists wasnt a competitive process so this safeguards them. Do you anticipate that there might be another bidder here that wishes to own Zynga as much as you do?
ZELNICK: Very difficult for me to state.
FABER: And what about the competitive landscape overall? When you believe about EA or you consider Activision today, you know, in regards to what you have now done with this deal. how are you located versus those rivals?
ZELNICK: Look, weve been saying for years consisting of, including on this program, that the one problem that we could not deal with naturally in the time frame we d like to was scale and to be competitive, to resolve the most interesting opportunities in the future and to provide competitive operating margins, we required scale but it had to be a specific kind of scale. That puts us in a position where we are extremely competitive with the two larger gamers in the company and I believe scale will matter and provided the opportunities that we see ahead. I believe it matters more than ever.
FABER: You understand, you discussed culture. Theres constantly a concern on the part of shareholders possibly its even being shown to a particular degree your stock cost right now that its challenging to incorporate. What guarantees do you give your shareholder base that you understand how to actually undertake this to make certain that the cultures do mesh and that you do get those synergies that are so crucial to this deal youre speaking about?
ZELNICK: Theyre reasonable concerns, you know, we weve gotten to know this management group over an extremely long duration of time so certainly a very friendly mix and one of the crucial problems was, do we fit together culturally. I imply its absolutely extraordinary and Zynga has terrific data analytics and a chart whose platform that will speak to everything to Take-Two is doing in mobile and complimentary to play. We think we can bring that to mobile and that is not shown in the revenue synergies that weve discussed.
CRAMER: Now Strauss, I was out in NVIDIA just recently and its extremely clear that Jensens got incredible ideas about the actual, Im discussing realistic, possibly more than natural characters, where you can insert them into existing video games. Where are you with utilizing these new chips that NVIDIA has that make it so that its not simply realistic but its simply pure truth?
ZELNICK: So, its a terrific question. You know, we havent talked about particular chip makers, you know, NVIDIAs an incredible company, and I know a favorite of yours, Jim, and its been an excellent call. Ive stated often times within the next five plus years, constantly difficult to call the exact timing, were going to be able to make interactive home entertainment that looks like live action, even though its entirely produced inside a computer system. Now, not all titles will wish to look that method in the exact same method that not all motion pictures today are live action. Theres animation as well. There, there are numerous various creative expressions in interactive home entertainment. Nevertheless, in certain instances, for example, sports games, basketball, I believe you can expect that they will look increasingly more natural whichs an outcome of what, what technological advances are enabling our innovative groups to do and, you know, combined, were going to have 8,000 people who establish video games between the Zynga operation and the Take-Two operation.
FABER: Wow. You know, kind of on that note to a specific degree, even deals that dont appear any competitive on the face and I would include yours among them, get an extremely difficult evaluation these days from the, the DOJ or the FTC. What guarantees can you offer shareholders in your belief a minimum of that youre going to have the ability to pass the regulatory review thats coming your method on an antitrust level?
ZELNICK: We feel great about it. Were still in terms of percentage of the general market a reasonably small business so we feel cautiously positive.
FABER: Alright. Strauss, appreciate you joining us on this important day for your business. Thank you.
ZELNICK: Thank you for having me.
Updated on Jan 10, 2022, 1:00 pm
These Are The Funds Louis Bacon Trusts His Foundations Money ToHedge fund supervisors are among those who make millions of dollars every year, and a number of them participate in philanthropy. Some have even established their own structures to distribute their millions, and among them is Louis Moore Bacon, the creator of the Moore Foundation and Moore Capital Management. Q3 2021 hedge fund letters, Read MoreTake-Two Interactive CEO On Decision To Buy Mobile Gaming Company Zynga
