ElectronicArts to Go Private in $55 Billion Buyout Led by Saudi and US Investors
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EA (Eletronic Arts) Sports logo is seen in this illustration, August 10, 2022. REUTERS/Dado Ruvic
After more than 30 years as a public company, Electronic Arts (EA), one of the biggest names in video gaming, is preparing to take itself private, as reports emerge of a massive $55 billion leveraged buyout (LBO) by private equity firm Silver Lake. In addition to Silver Lake, this reported LBO will also be backed by the Saudi Arabian sovereign wealth fund (PIF) and Affinity Partners, the investment firm founded by Jared Kushner. The buyout is structured in such a way that EA is set to take on more than $20 billion in debt, $18 million of which will need to be repaid in the short term (like next quarter), which raises some level of concern that cost reductions and potential layoffs may occur as EA adjusts to its new financial reality.
If completed, this would be one of the largest LBOs in history; it is also being described as the single-largest all-cash private technology investment in history. The market seemed to approve of the rumor; EA shares increased by over 15% on the news from the initial Wall Street Journal report. Before the buyout rumors were reported, EA shares were trading not far from a market capitalization value of $42 billion, and EA benefits from revenue-generating franchises, such as EA Sports FC, The Sims, and Battlefield, that are enhanced by live services and microtransactions.
The LBO deal also has geopolitical implications. Saudi Arabia and PIF are investing heavily in global gaming, as part of the Vision 2030 agenda, to diversify the country’s economy and modernize the country’s global reputation. Industry observers also view EA’s potential LBO discussion as an overall shift in business practices away from the public pressure for quarterly (or even annual) reporting in the public markets.
References:
https://www.wsj.com/business/deals/ea-private-deal-buyout-video-game-maker-808aefec
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