Video game maker Electronic Arts is close to a $50 billion privatization deal with a consortium including Silver Lake and Jared Kushner's Affinity Partners, in one of the largest leveraged buyout deals in history, the Financial Times reports, writes UNN.
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The deal, according to sources, could be announced as early as Monday, if no obstacles arise at the last minute. Sources added that EA is likely to be valued at $50 billion.
According to sources, the consortium behind the deal includes Saudi Arabia's Public Investment Fund, technology-focused private equity group Silver Lake, and Affinity Partners, an investment firm run by US President Donald Trump's son-in-law Jared Kushner.
EA, with approximately 700 million user accounts, has one of the richest content libraries among its competitors, including games such as EA Sports FC, Madden NFL, and Battlefield. JPMorgan is arranging a debt financing package of over $20 billion for the deal, sources added.
This deal is one of the largest privatization transactions in history, surpassing the $45 billion buyout of Texas utility group TXU in 2007. However, including debt, that deal was almost $70 billion.
The Wall Street Journal was the first to report the deal. EA shares jumped approximately 15% to $192.83 after the news, bringing the California company's market value to approximately $48 billion. Before the news was published, the shares had risen approximately 17% for the year.
The deal comes as the gaming industry struggles to find new sources of growth after a boom caused by the COVID-19 pandemic. EA's total net revenue, as reflected in recent quarterly reports, has shown virtually no year-over-year growth.
Some industry executives argue that generative AI tools will automate many aspects of the game development process, which will reduce costs, which for some hits can reach hundreds of millions of dollars.
While the adoption of AI in the industry is still in its early stages, this technology could allow new private shareholders of EA to cut costs.
Two years after Microsoft acquired Activision Blizzard for $75 billion, one of the largest deals in technology industry history, EA has become one of the largest independent game publishers outside of China, alongside Grand Theft Auto creator Take Two Interactive.
EA's list of annual franchises includes some of the most profitable games in the console industry, including the hit EA Sports FC, formerly known as FIFA.
However, the company's traditional business model, which involves a price of over $70 for a packaged game, has faced challenges due to free-to-play multiplayer games such as Roblox and Fortnite. EA is working to expand its "online services" games, which now account for almost three-quarters of its net bookings, a measure of players' total spending on its games before deducting commissions to retailers and digital platforms.