The video game company Electronic Arts (EA) has reached an agreement to be acquired by a consortium of private investors in a transaction that values the creator of popular titles like “Battlefield” and “Madden NFL” at $55 billion. If finalized, this would mark the largest leveraged buyout in history.
Saudi Arabia’s Public Investment Fund, Affinity Partners led by Jared Kushner, and private equity firm Silver Lake have teamed up to secure the acquisition with a total of $36 billion in cash, existing equity owned by PIF, and $20 billion secured through debt arranged by JPMorgan, as stated by the company on Monday.
For the PIF, which is valued at $1 trillion, this investment represents a significant opportunity to enhance efforts to establish Saudi Arabia as a central player in the gaming and sports industries, banking on the sustained value of popular gaming franchises as the sector rebounds from an extended downturn.
This transaction may signal a revival of large-scale leveraged buyouts, which have seen diminished popularity after notable deals prior to the Global Financial Crisis resulted in failures. One example is the record $45 billion acquisition of TXU Energy in 2007, which ended in bankruptcy just seven years later.
According to Kyle Walters, a private equity analyst at PitchBook, the EA transaction indicates a resurgence of activity in mega-deals, following years of investors seeking lower-profile opportunities due to market challenges like increased borrowing costs.
EA shareholders will be offered $210 per share in cash, representing a 25 percent premium over the share price of $168.32 on September 25, prior to the announcement of the deal. This gives the company an equity valuation of approximately $52.5 billion, as calculated by Reuters. The shares saw a 5 percent increase during midday trading, reaching around $202.54.
The move to privatize comes at a pivotal moment for EA, which is leaning on its well-established sports franchises and action shooter titles to navigate a sluggish video game market as consumers become more discerning in their spending.
Analysts at Freedom Capital Markets noted that the financial resources of the investor consortium should allow EA to focus on long-term growth strategies that might have been deemed too risky or costly while it was publicly traded.
Electronic Arts is preparing for the release of the highly anticipated “Battlefield 6” amid an industry trend where gamers tend to stick with well-known franchises.
Despite the appealing offer of $210 per share, analysts at Benchmark expressed concerns that it does not adequately reflect the company’s true value. They believe that with the upcoming launch of Battlefield 6 and a product pipeline likely to generate over $2 billion in additional bookings by fiscal year 2028, EA’s full revenue potential is just beginning to surface.
The company’s sports division has been a standout performer for more than a decade thanks to its global appeal and consistent revenue generation, as strong in-game spending habits are crucial for the longevity of its franchises.
The deal is particularly attractive for Saudi Arabia’s wealth fund as part of the nation’s strategy to diversify its economy beyond oil, with significant investments in sectors such as infrastructure, tourism, sports, and gaming.
Jared Kushner, married to Ivanka Trump, founded Affinity Partners in 2021, attracting funding from investors in Saudi Arabia, Qatar, and the United Arab Emirates.
The deal is anticipated to finalize by the first quarter of fiscal year 2027, with $18 billion in debt to be financed at closing. The company will continue operations in Redwood City, California, with CEO Andrew Wilson remaining in charge.
The previous record for leveraged buyouts was held by the $45 billion acquisition of TXU Energy in 2007, which later faced bankruptcy in 2014. Other leveraged buyouts, such as those involving Toys “R” Us and Hertz, also encountered significant difficulties.
Toys “R” Us declared bankruptcy in 2017 a dozen years after being acquired by Bain Capital and KKR for $6.6 billion. Hertz could not endure the pandemic, filing for bankruptcy in 2020 after being taken private for $14.8 billion in 2005.
Should EA choose to cancel the merger due to a board change, accept a better offer, or pursue a different agreement within a year of a shareholder vote against the deal, they will incur a $1 billion penalty. Likewise, the investor consortium will also face the same fee if regulatory delays extend the completion past September 28, 2026, or if they violate the terms of the agreement.