Hello and welcome to the first ever edition of The Game Business Micro.
This is your quick digest of the big stories from the last week, with a bit of extra analysis and information from me. You can hear my take on things via the Show above, or simply read the nice concise run-down below.
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Today, we discuss EA’s shock move to become a private company, we dive into the big reveals from Tokyo Game Show, there are changes at the top for Nintendo of America, while another UK studio leaves the Tencent family
Enjoy!
EA in shock $55bn deal to go private
In Brief: EA has signed an agreement with an investor group to become a private company. The investors mounting the takeover include Saudi Arabia’s Public Investment Fund and US-based private equity firms Silver Lake Management and Affinity Partners. Affinity Partners is run by Donald Trump’s son-in-law Jared Kushner.
Key Takeaways:
Andrew Wilson to continue on as CEO. The deal is expected to close by the end of June next year.
The deal consists of equity investment of around $36 billion, and $20 billion of debt financing committed by JPMorgan Chase Bank.
It’s a potentially good time to sell. EA’s stock has been performing well (even before the spike), and there is positive momentum behind the firm’s upcoming Battlefield 6.
EA being for sale is not a complete surprise (there had been previous reports that the company was open to offers). However, the acquisition by private companies is unexpected. Private equity firms are typically aggressive in their management of companies.
This is a leveraged buyout, which means there’s a high amount of debut involved and EA would need to generate a strong cash-flow (more so than it does currently) to reimburse that debt. As a result, we might expect a very hands-on approach from the investment group.
One market analyst is concerned by the move, pointing to the Saudi Arabia’s Public Investment Fund’s previous investment in Embracer. “Accumulating wealth may not produce more wealth. It could destroy quite a lot, not just financially, but creatively, with a potential cost to people and brand.”
CEO Andrew Wilson said: “We will continue to push the boundaries of entertainment, sports, and technology, unlocking new opportunities. Together with our partners, we will create transformative experiences to inspire generations to come. I am more energized than ever about the future we are building.”
Egon Durban, Co-CEO of Silver Lake said: “We are going to invest heavily to grow the business and we are excited to support Andrew and the EA team as the company accelerates innovation, expands its reach worldwide, and continues to deliver incredible experiences to players and fans across generations.”
