Electronic Arts’ Record Setting Buyout and Future Outlook

Thaddius Gamueda
Head Finance Editor

Sports are an infatuation of people around the globe. Children and adults alike all dream of being superstars within their favorite sports. Video games have become the engine for these dreams with franchises like Madden, Fifa, PGA Tour and so on. But Electronic Arts, the renowned producers of these household names, has recently announced they have agreed to a leveraged buyout worth $55 billion to go private. What does this mean for the company and the outlook of gaming as a whole?

What is Electronic Arts and Who Bought Them Out?

Electronic Arts is the producer of prominent gaming franchises such as the ones named above, as well as Apex Legends, Battlefield, and numerous Star Wars titles. A global powerhouse in the video game industry to say the least. Before this deal was released, Mass Effect 5 was set to be the next big release from the studio. In recent memory, EA has been struggling as of late with their past three games being misses in the eyes of fans around the world.

Saudi Arabia’s Public Investment Fund (PIF), Jared Kushner’s Affinity Partners, and Silver Lake are leading the historical buyout. $36 billion of the funds came directly from PIF, while $20 billion came from debt financing by JPMorgan. The specifics of the deal from EA state that shareholders will get $210 per share in cash which represents a 25% premium to share price. PIF previously held a 9.9% share, and it will be rolled over with the deal.

PIF is a trillion-dollar fund that has been increasingly invested more into entertainment and the video game sector as Saudi Arabia looks to become the middle eastern leader. Jared Kushner is the CEO of Affinity Partners, a private equity firm founded by him in 2021, has had ties with PIF since 2021 as he secured $2 billion to manage previously. Silver Lake is another private equity firm that was founded in 1999 and is well versed with their technology sector investments.
Reaction in the Video Game Industry and Stock Market

The second the news hit the headlines, EA’s stock price has skyrocketed a staggering 20% in the last few days. As this record buyout has occurred, many investors have come running to purchase EA’s stock, hoping to cash in on the $210 buyout price stated earlier. Although there was an initial rush, EA’s stock has leveled out at around the $201-$202 range as of October 1st 1:23PM. EA’s stock had the most drastic movements, but competitors such as Take Two Interactive (TTWO), Roblox (RBLX), and Microsoft (MSFT) have also seen growth as well. Investors should be keeping an eye on this sector as technology is such a focal point in the markets today.

What is Next for EA and the Buyers?

As for EA, they will be under new management to say the least. As their majority owners are the three groups stated earlier, their decision making is set to shift. What consumers of the games should be focused on in the future is how the product changes. EA has never been the golden child of the gaming industry, with many complaints coming from fans of their games. Their previous game, Dragon Age: The Veilguard was the third miss in a row from the company in recent memory. Before this buyout, cutbacks and cancelations of projects were looming over the company, but this LBO allows them to stay afloat in the ever-changing video game market.

As for the new ownership, the three parties are versed when it comes to the entertainment and technology sectors. Saudi Arabia is planning to become a powerhouse in the sports entertainment sector, as they are set to host the 2034 Fifa World Cup. This LBO could be seen as a precursor to their true goal of becoming the global leader in the sports industry. Affinity partners and Silver Lake join them because of the inherent value EA brings to the table. With the 8th largest market capitalization in the sector, the foundation to become a powerhouse is there. With this LBO, many things are still uncertain. How will this new ownership group rebuild the trust of many alienated fans of their franchises? Only time will tell.

Contact Thaddius at gamuedth@shu.edu