EA’s $55 Billion Buyout Sets New ‘Going Private’ High Score

Video game-maker Electronic Arts has agreed to go private for $55 billion in the biggest-ever buyout of a public company. Saudi Arabia’s sovereign wealth fund, along with private equity firms Silver Lake and Affinity Partners, will pay $210 per share to EA’s investors. That’s nearly 25% more than what the stock was worth before The Wall Street Journal reported details of the deal on Friday.

EA has been making popular titles like “The Sims” and “Madden NFL” for decades. But recent years have left the company floundering like a Sim in a pool with no ladder. 

Not All Fun and Games

The gaming industry boomed during the pandemic, but its rapid growth didn’t continue once consumers could go outside and touch grass, en masse, again. EA contracted with the broader industry, reducing its workforce through several rounds of layoffs, shutting down development studios and canceling games. The company’s stock experienced its biggest single-day slide in 17 years in January after executives slashed annual bookings guidance.

The problem: Free-to-play games like “Fortnite” dominate the gaming industry, not $80 console titles. Plus, games like EA’s upcoming “Battlefield 6” are under immense pressure to succeed since they cost hundreds of millions of dollars to make. So EA’s switching its focus:

• EA already made three-quarters of its revenue last year from live-service games that players continue to pour money into after the initial purchase by buying updates and in-game perks. The buyout deal could see EA take that strategy a step further.
• Analysts said the Saudi fund could see some of EA’s biggest titles turn into games that can be played on mobile devices and streaming apps like Netflix. The new games could copy the successful “Fortnite” playbook by being free to play and making their money from in-game purchases. 

Pressing Buttons: The massive buyout of EA could spark investor interest in gaming companies: Shares of EA and other gaming companies, including Take-Two and Roblox, rose yesterday. But the deal has a vital level to complete first: regulatory approval. Regulators may question whether the Saudi fund’s involvement raises national security concerns. EA’s games have a trove of data on American gamers that goes beyond their “Battlefield” kill/death ratios. The Saudi fund has been expanding its gaming interests with sizable stakes in EA and rival gaming company Take-Two Interactive, as well as acquiring the gaming division of Pokémon Go-maker Niantic. Saudi Arabia also hosted the Esports World Cup last year.