Record deal for the gaming industry

EA is valued at around $55 billion in the acquisition. Photo: Bloomberg .

Video game developer Electronic Arts (EA), the creator of popular franchises such as Battlefield and Madden NFL, has agreed to sell itself to a consortium of investors in a $55 billion leveraged buyout (LBO). If completed, this will be the largest LBO in history.

According to the announcement on September 30, the group of investors including Saudi Arabia's Public Investment Fund (PIF), Affinity Partners founded by Jared Kushner and Silver Lake will spend 36 billion USD in cash, plus capital contribution from PIF and 20 billion USD in debt financed by JPMorgan bank.

The move marks a significant step forward for the PIF, a fund worth around $1 trillion , in its ambition to turn Saudi Arabia into a global hub for sports and gaming. It is also seen as a sign that large-scale leveraged buyouts are returning, after a long period of relative obscurity since the 2008 global financial crisis.

The EA deal is reminiscent of the $45 billion acquisition of Texas energy company TXU Energy in 2007. However, TXU went bankrupt just seven years later, leaving many skeptical about the sustainability of giant LBO deals.

In this deal, EA shareholders will receive $210 in cash per share, a 25% premium over the September 25 closing price of $168.32 . This brings the company's equity value to about $52.5 billion . Following the deal, EA shares rose 5% to $202.54 .

“This deal paves the way for sponsors to return to big deals after years of restraint due to high borrowing costs and unfavorable market conditions,” said Kyle Walters, an analyst at analytics firm PitchBook.

Electronic Arts is heavily reliant on e-sports, and Freedom Capital Markets believes the new investor group's financial backing will help EA push forward with long-term projects that would be difficult to implement as a public company.

EA is also preparing to launch Battlefield 6, which is expected to bring in more than $2 billion in additional revenue by fiscal 2028. However, according to Benchmark , the $210 /share price is still “significantly below” the company’s intrinsic value, as its growth potential has yet to be fully exploited.

Source: https://znews.vn/thuong-vu-ky-luc-cua-hang-game-hang-dau-the-gioi-post1589611.html