Videogame developer Electronic Arts (EA) has agreed to sell itself to a group of private investors in a deal that values the maker of Battlefield and Madden NFL at $55bn, making it the largest leveraged buyout in history.
Saudi Arabia’s Public Investment Fund (PIF), Jared Kushner’s Affinity Partners and private equity firm Silver Lake came together to buy the popular videogame maker. They are financing it with a combination of $36bn in cash along with equity already held by PIF as well as $20bn in debt financed by JPMorgan, the company said Monday.
The deal for the maker of Battlefield underscores how deep-pocketed investors are betting on the enduring value of blockbuster game franchises as the industry recovers from a prolonged downturn.
The deal also stands as a watershed moment in the market for leveraged buyouts (LBOs), even though some of the biggest such buyouts in the past have ended disastrously.
The previous LBO record holder, the $45bn takeover of Texas utility TXU Energy in 2007 by private equity firm KKR & Co, alternative asset manager TPG and Goldman Sachs, went bankrupt in 2014. The leveraged buyouts of Toys R Us and Hertz also had rough goes.
- EA’s $55bn buyout is the largest leveraged buyout (LBO) in history.
- Signals strong investor confidence in blockbuster gaming franchises.
- Follows a history of risky LBOs that often ended in bankruptcy.
- Sets a new benchmark for private investment in the gaming industry.
Toys R Us filed for bankruptcy in 2017 about a dozen years after Bain Capital and KKR bought the retailer for $6.6bn. Rental car company Hertz did not survive the pandemic, filing for bankruptcy in 2020 after going private for $14.8bn in 2005.
Under Monday’s deal, Electronic Arts shareholders will receive $210 per share in cash, representing a premium of 25% on the closing price on September 25 before reports of a deal emerged. The company’s shares jumped 5% in morning trading to about $203 a share.
The deal has an equity value of $52.54bn, according to Reuters’ calculations.
The take-private offer comes at a crucial time for EA, which is banking heavily on its core sports portfolio and action shooter intellectual property to weather a sluggish video game industry as gamers get picky with spending.
Electronic Arts is gearing up to launch the much-awaited Battlefield 6 in an industry where gamers stick to proven and recognisable titles.
“While the $210 per share offer price may appear compelling … we believe it falls materially short of the company’s intrinsic value. With Battlefield 6 about to launch and a pipeline that could add more than $2bn in incremental bookings by full-year 28, the true earnings power of EA is only beginning to emerge,” Benchmark analysts said.
The company’s sports portfolio has stood out for more than a decade due to its global popularity and consistent recurring revenue as strong in-game spending patterns remain key for the franchise's longevity.
The transaction is expected to close in the first quarter of financial year 2027 with $18bn of the debt financed at closing. It will remain in Redwood City, California, with CEO Andrew Wilson remaining at the helm.
EA must pay a $1bn fee if it terminates the merger due to a board reversal, accepts a higher bid or pursues another deal within a year of a shareholder rejection.
The consortium owes the same amount if regulatory delays push completion past September 28 2026, or if it breaches the agreement.
Reuters
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.