A consortium comprising the Public Investment Fund, US private equity firm Silver Lake and Affinity Partners signed an agreement to acquire US-based gaming giant Electronic Arts (EA), with the transaction valued at approximately USD 55 bn, EA said in a press release out yesterday. The agreement marks the largest leveraged buyout in history and also the biggest all-cash takeover announced this year. The agreement is USD 5 bn larger than previously anticipated, with news of the potential acquisition surfacing earlier this week.

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Who’s paying what? The consortium will fund the acquisition with roughly USD 36 bn in equity and USD 20 bn in debt financing fully underwritten by JPMorgan Chase Bank, of which USD 18 bn to be funded at closing. The PIF will roll over its existing 9.9% stake in EA.

Priced at a premium: Current shareholders will receive USD 210 per share, representing a 25% premium over EA’s closing price on Thursday, 25 September, before news of the deal broke. The offer also exceeds the videomaker’s previous all-time high of USD 179.01 on 14 August.

BUT- Some argue the offer undervalues EA, when taking into consideration the upcoming launch of Battlefield 6 and a pipeline that could generate an additional USD 2 bn in bookings by FY 2028, Benchmark analysts told Reuters. “The board’s decision to recommend a sale at USD 210 per share suggests a prioritization of near-term certainty and legacy over maximizing long-term shareholder value,” Mike Hickey of The Benchmark told the Associated Press, referring to the firm’s pipeline strength and growth environment.

Not everyone agrees: Recent appreciation in share price is likely to have a limited effect, as the success of EA’s sports franchises and live services streams are already mostly priced in, the news agency quoted a research note from Nick McKay of Freedom Capital. “The financial backing and resources of the investor consortium should enable EA to increase its focus on long-term growth opportunities that may have been viewed as too risky or expensive as a public company,” Mckay added.

What’s next? The privatization — which is expected to close in 1Q 2027 after clearing regulatory and shareholder approvals — will not change the headquarters of the Redwood City-based company nor its CEO Andrew Wilson, who “doubled revenue… and driven a fivefold increase in market cap during his tenure,” Silver Lake’s co-chief Egon Durban said in the statement. EA will then be delisted from Nasdaq after close.

The rationale: EA — which owns blockbuster franchises such as EA Sports FC, Madden NFL, Need for Speed, and The Sims — is considered an attractive investment target for its “premier sports franchise, with accelerating revenue growth and strong and scaling free cashflow,” Durban said.

A comeback for megadeals? The agreement signs a potential return to mega transactions after “several years of fishing for opportunities down market due to market headwinds such as higher borrowing costs,” Reuters quotes private equity analyst at PitchBook Kyle Walters as saying.

To up EA’s profits and manage its new large debt load, the buyers are betting on AI to slash EA operating costs by replacing voice actors, creating game assets, and speeding up testing, the Financial Times reported, citing unnamed sources said to be involved in the transaction.

In case of breakup, EA would owe a USD 1 bn fee if its board reverses course, accepts a competing offer, or pursues another agreement within a year of shareholder rejection, according to terms cited by Reuters. The consortium faces the same penalty if regulatory hurdles delay closing beyond 28 September 2026, or if it fails to uphold its commitments, the newswire added.

Not gaming around: Saudi sees gaming as important for its diversification efforts under Vision 2030 and a way to expand its cultural footprint. The Kingdom’s investments in esports and competitive gaming saw it host the Esports World Cup recently and announce plans to host a Nations Cup for national teams. The fund’s gaming and esports unit, Savvy Games Group, acquired US-based Scopely in 2023 for USD 4.9 bn, which subsequently purchased rights to sensational hit Pokémon Go and several other titles from Niantic in a USD 3.5 bn transaction that closed in March.

ADVISORS- Goldman Sachs is serving as EA’s financial advisor, with Wachtell, Lipton, Rosen & Katz providing legal counsel. On the consortium side, JP Morgan Securities is acting as financial advisor. Kirkland & Ellis is serving as lead legal counsel for both the consortium and PIF, with additional counsel from Gibson, Dunn & Crutcher. Latham & Watkins and Simpson Thacher & Bartlett are advising Silver Lake, while Sidley Austin is acting for Affinity Partners.

Market reax: The California-based firm’s shares climbed 4.5%, closing at USD 202.05, pushing its market cap to some USD 48.4 bn.

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