By Nivedita Balu and Tiyashi Datta

(Reuters) -Take-Two Interactive said on Monday it would buy Zynga for $11.04 billion in a deal that will bring the smash-hit video game “Grand Theft Auto” and mobile-friendly “FarmVille” under one roof as demand for affordable on-the-go gaming surges.

The deal, one of the biggest in the sector, will create a gaming powerhouse spanning console, PC and mobile devices and comes as people increasingly gravitate toward smartphone games.

Take-Two, also known for adventure game “Red Dead Redemption”, offered $9.86 per share for the deal, representing a 64% premium to the last closing price of Zynga shares. Including debt, the acquisition is worth $12.7 billion.

“It’s a bombshell deal … Zynga was on the list of potential M&A transactions for a long time in the video game business,” said Serkan Toto, CEO of videogame consulting firm Kantan Games.

“Take-Two is looking at the industry map and says ‘we have basically nothing here.’ So, a lot of people have been have been expecting Take-Two to make a big deal in mobile to close the gap with competitors like Electronic Arts for example.”

Electronic Arts bought Glu Mobile for $2 billion last year. Zynga itself has made a string of acquisitions in the past two years, including Echtra and Chartboost.

The mobile gaming sector is expected to reach a market size of $116.4 billion by 2024, growing at a compound annual growth rate of 11.2% from 2019 to 2024, according to gaming market data firm Newzoo.

Zynga’s aggressive dealmaking and Apple’s move to allow iPhone users to opt out of being tracked by advertisers dented the company’s shares, erasing 35% of their value in 2021. It has also missed Wall Street’s profit targets in the past three quarters.

“It is a big price tag for a company that has not consistently produced profits or new blockbusters,” said Erik Gordon, professor at Ross School of Business, University of Michigan.

Take-Two has $2.7 billion financing from J.P. Morgan and intends to fund the rest with cash and proceeds of a new debt issuance.

It expects about $100 million in annual cost savings within the first two years, and more than $500 million in net bookings over time when the deal closes in mid-2022.

(Reporting by Tiyashi Datta, Nivedita Balu and Eva Mathews in Bengaluru; Editing by Aditya Soni, Krishna Chandra Eluri and Saumyadeb Chakrabarty)