Electronic Arts is logging off of Wall Street.
The gaming giant behind The Sims and Madden is being sold in an all-cash deal worth about $55 billion to a group of investors including private equity firm Silver Lake, Jared Kushner's Affinity Partners, and Saudi Arabia’s Public Investment Fund, the kingdom’s sovereign wealth fund. Should the deal go through, it will be the largest leveraged buyout ever.
The deets: EA shareholders will get $210 a share in cash, a 25% premium over Thursday’s closing price, when the WSJ first reported the deal. The investor consortium will own 100% of the company and contribute $36 billion of equity, while JPMorgan will provide $20 billion of debt financing.
Shares of EA climbed 4.50% today on the announcement, following a 15% jump on Friday. Fellow gaming leaders Roblox and Take-Two Interactive also jumped today.
Why did EA do it?
Going private may seem like surrendering mid-game, but the historic deal is a lifeline for EA, which—like the rest of the gaming industry—has plateaued since the Covid-19 videogame boom.
While shares of the company are up 38.49% this year so far, it’s had three waves of layoffs since 2023 and has struggled to find new franchises beyond its classics. Case in point: EA’s stock gains this year are largely thanks to the excitement around the upcoming release of Battlefield 6.
Consolidation is the name of the game: Microsoft acquired Activision Blizzard, the maker of Call of Duty, in 2023 for $69 billion.
Some gaming experts see the buyout as a sign EA is ducking from the scrutiny of the public market at a time when gamers are holding onto existing titles for longer and shifting to free-to-play games, according to Bloomberg.
Zoom out: The deal isn’t just a reflection of the transformation in the gaming industry, but for the geopolitical map, too. Saudi Arabia has increasingly invested in videogame companies in its push to diversify its economy from oil while amassing cultural influence. Its Public Investment Fund already owned a 10% stake in EA and invested in Nintendo in May 2022. In 2023, it closed a $4.9 billion deal to buy Scopely, which operates mobile games like Marvel Strike Force.
The transaction is expected to close in the first quarter of 2027. After that, EA’s success or failure isn’t public investors’ problem anymore.—LB
Making sense of market moves
Stay up to date on the latest market news with daily analysis of the investing landscape, served up Brew-style.