Videogame giant Electronic Arts to go private for $55 billion

Videogame developer Electronic Arts has agreed to sell itself to a group of private investors in a deal that values the maker of 'Battlefield' and 'Madden NFL' at $55 billion, 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 $36 billion in cash along with equity already held by PIF as well as $20 billion 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 $45 billion 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.

Toys "R" Us filed for bankruptcy in 2017 about a dozen years after Bain Capital and KKR bought the retailer for $6.6 billion. Rental car company Hertz didn't survive the pandemic, filing for bankruptcy in 2020 after going private for $14.8 billion in 2005.

Under Monday's deal, EA shareholders will receive $210 per share in cash, representing a premium of 25 per cent as of the closing price on September 25 before reports of a deal emerged.

The deal has an equity value of $52.54 billion, 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 videogame 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 recognizable 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 $2B in incremental bookings by FY28, the true earnings power of EA is only beginning to emerge," Benchmark analysts said.

The company's sports portfolio has stood out for over 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 fiscal year 2027 with $18 billion 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 $1 billion 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.