Electronic Arts Nears $50 Billion Deal to Go Private

Electronic Arts is reportedly in talks to go private in a deal worth around $50 billion. The deal would mark a significant shift in the company's ownership structure and valuation.

Electronic Arts (EA), a leading global developer and publisher of video games, is reportedly nearing a deal to go private in what could be the largest leveraged buyout (LBO) of all time. According to sources familiar with the matter, a group of investors, including private-equity firm Silver Lake and Saudi Arabia’s Public Investment Fund, is close to unveiling a deal for the publisher best known for its sports games, including FIFA and Madden NFL, as well as The Sims and other titles Videogame Giant Electronic Arts Near Roughly $50 Billion Deal to Go Private^[1].

The potential deal, which could be announced as early as next week, would value EA at around $50 billion, significantly higher than its current market value of around $43 billion. This valuation would make it the largest LBO in history, not adjusting for inflation, surpassing the 2007 purchase of Texas utility TXU by a group of private-equity firms for around $32 billion Videogame Giant Electronic Arts Near Roughly $50 Billion Deal to Go Private^[1].

The deal is a significant shift in EA's ownership structure and would mark a major change in the company's strategic direction. EA has a strong financial profile, with consistent revenue growth and a robust balance sheet. The company's revenue growth over the past three years has been 5%, with operating and net margins of 19.83% and 13.94%, respectively. However, the company has seen a slight decline in operating margin over the past five years, but its balance sheet remains strong with a debt-to-equity ratio of 0.32 Electronic Arts (EA) Anticipates Boost from Upcoming Release^[2].

The upcoming release of Battlefield 6 on October 10 could also positively impact EA's stock performance, according to Citi analyst Jason Bazinet, who has placed EA on a "30-day catalyst watch" with a Neutral stance and a price target of $173 Electronic Arts (EA) Anticipates Boost from Upcoming Release^[2]. Despite potential warning signs such as insider selling activity, EA's strong financial health and high Piotroski F-Score of 7 and Beneish M-Score of -2.64 suggest a low likelihood of financial manipulation Electronic Arts (EA) Anticipates Boost from Upcoming Release^[2].

The deal, if it comes together, would have significant implications for the gaming industry and investors. It would mark a return to large LBOs in the sector, which all but disappeared after the 2008-09 financial crisis. The deal could also provide EA with a new strategic direction and potentially allow it to pursue acquisitions or other growth opportunities that it might not have been able to consider as a publicly traded company.