Electronic Arts signs $55-billion deal with Saudi Arabia’s Public Investment Fund and more to go private. Analysts say it’s worth more.

Electronic Arts has announced plans to go private in what will be the largest leveraged buyout in history. The $55 billion purchase of the entertainment giant behind franchises that include Madden NFL and Battlefield is set to close in the first quarter of fiscal year 2027.

Saudi Arabia’s Public Investment Fund (PIF) will be, by far, the majority investor in EA, one of the largest third-party publishers of video games. Silver Lake and Affinity Partners (whose CEO is Donald The President’s son-in-law Jared Kushner) will own minority interests. CEO Andrew Wilson will continue to head EA.

The all-cash deal calls for a buyout of EA stock at a price of $210 per share. The company was trading at $202 per share Monday afternoon. On Thursday, before The Wall Street Journal reported a buyout was imminent, shares were trading at roughly $171.

EA is a long-time stalwart in the video game industry, but like many publishers of late, has been somewhat stalled financially as the gaming boom of the pandemic has slowed considerably. In 2022, EA reported $7.2 billion in revenues. The following year saw an increase to just $7.6 billion and 2024 saw the figure at $7.4 billion. The stock has also lagged far behind the S&P 500’s gains.

Was EA sold for too little?

While the industry has been in the midst of a consolidation trend, both in terms of buyouts and revenues, some analysts think EA might have been undervalued in this deal.

“While the $210 per share take-out price represents a substantial premium to EA’s unaffected trading levels, we continue to believe the transaction undervalues EA’s long-term earnings power,” wrote Benchmark’s Mike Hickey in a note to investors. “We value EA at $250 per share, with a best-case path to $300 if Battlefield evolves into the market share leader.”

The leveraged buyout, Hickey argues, transfers what he expects will be a “franchise-defining growth cycle” to new owners before current shareholders can realize those gains.

“In our view, this transaction is a self-serving, opportunistic move by management and the investor group,” he wrote.

Wedbush’s Alicia Reese didn’t go quite so far as Hickey, but did point out that the purchase price (about 20X EBITDA) was a lower multiplier than the Activision deal (which worked out to 21.5X) and roughly on par with the industry average over the last five years of 19.8X. EA, with its rich catalog of IP would presumably be able to command a higher multiple.

Boon for Riyadh

Assuming the deal closes, the buyout will be a victory for the PIF, which has been expanding its interests in the video game world in recent years. The group holds stakes in several well-known publishers.

Prior to Monday’s deal, the PIF owned roughly 10% of EA’s shares. It also holds 6.2% of Grand Theft Auto publisher Take-Two Interactive Software and 4.2% of Nintendo. This spring, it purchased Niantic, maker of Pokemon Go, for $3.5 billion and also paid $4.9 billion for Scopely, the maker of mobile gaming hit Monopoly Go.

The deal comes as criticism continues about the Saudi Royal family’s record of human rights abuses.

While the $55 deal is expected to set a record as far as leveraged buyouts (CNBC reports EA has 45 days to solicit a better offer, though the deal was unanimously approved by the company’s board), it still falls short of an overall industry record. Microsoft’s $69 billion buyout of Activision-Blizzard remains the industry’s most expensive acquisition to date. Microsoft faced several hurdles from regulators in the U.S. and U.K. as it attempted to close that purchase.

The Microsoft/Activision deal closed in 2023. In July of this year, Microsoft announced plans to lay off 9,100 workers, with many of those cuts coming in the gaming division. (That followed an additional 6,000 jobs lost in May of this year.)

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