Electronic Arts Inc (NASDAQ:EA, ETR:ERT) said Monday it has agreed to be acquired in a $55 billion all-cash transaction led by Saudi Arabia’s Public Investment Fund, Silver Lake and Affinity Partners, marking what would be the largest leveraged buyout in Wall Street history.
The takeover values EA at $210 per share. Shares of the video game publisher, known for blockbuster titles such as Madden NFL, The Sims and Battlefield, surged 15% on Friday to close at $193.35 after the Wall Street Journal reported a deal was close.
Trading in EA was briefly halted Monday after a further 6% gain in premarket trading.
Jared Kushner, chief executive of Affinity Partners, praised the company’s “bold vision for the future” and said he grew up playing EA titles, which he now enjoys with his children. The Public Investment Fund will roll its existing 9.9% stake in EA into the buyout.
Analysts at Citi said they don’t expect rival bidders to emerge. In a note, they pointed out that at a $55 billion valuation, the implied return for buyers would be slim unless Wall Street earnings forecasts are too conservative.
That makes the economics less attractive for others considering a counteroffer. “As such, we see a competing bid as unlikely,” the bank said.
Wedbush noted that while the multiple being paid works out to about 17.5 times forecast 2026 earnings before interest, tax, depreciation and amortisation, that is below both Microsoft’s 2022 purchase of Activision Blizzard at 21.5 times and the five-year industry average of nearly 20 times.
The bank said the lower valuation reflects EA’s relatively uneven track record with new releases and volatility in its live-service games, which can rise and fall sharply in popularity.
Titles such as Dragon Age and Battlefield 2042 have underperformed in recent years, while Apex Legends has seen periods of both strength and weakness.
Even so, EA maintains a powerful catalogue anchored by its sports franchises, Madden, NHL, EA Sports FC, and licensing deals with Star Wars and college football.
The analysts argued the deal makes sense for Saudi Arabia, which has been building a gaming empire through its Savvy Games subsidiary.
The PIF has already invested over $17 billion across acquisitions such as Scopely and Niantic’s gaming arm, along with stakes in Nintendo, Take-Two and EA itself.
Owning EA outright would allow it to leverage assets such as Scopely’s mobile expertise and Niantic’s augmented reality capabilities to improve EA’s weaker-performing mobile portfolio.
Wedbush added that the decision to structure the buyout as a leveraged deal is not a concern, given the PIF’s deep financial resources. Using debt, they said, could even enhance returns if EA’s cash flow — projected at roughly $2 billion this year — exceeds expectations.
On the regulatory front, the bank anticipates a review by the Committee on Foreign Investment in the US (CFIUS), given the involvement of a foreign sovereign fund.
But it does not expect the scrutiny to derail the transaction, citing the consortium’s ability to restructure the deal if necessary and the buyers’ favourable standing with the current administration. Shareholder approval is also expected to be straightforward, given the premium offer.