'Battlefield' maker Electronic Arts to go private in record-setting $55 billion LBO

Highlights:

• Saudi Arabia's PIF, Kushner's Affinity Partners, Silver Lake lead buyout
• Existing EA shareholders to receive $210 per share, 25% premium
• EA's sports portfolio crucial amid industry downturn, analysts say
• Saudi Arabia aims to diversify economy with gaming investments

Videogame developer Electronic Arts has agreed to sell itself to a group of private investors in a deal that values the maker of "Battlefield" and "Madden NFL" at $55 billion, which if completed would be the largest leveraged buyout in history.

Saudi Arabia's Public Investment Fund, Jared Kushner's Affinity Partners and private equity firm Silver Lake came together to buy the popular videogame maker with a combination of $36 billion in cash, equity already held by PIF, and $20 billion in debt financed by JPMorgan, the company said Monday.

For PIF, Saudi Arabia's $1 trillion wealth fund, the investment is a massive opportunity to push ahead with efforts to become a global hub for games and sports, as it bets on the enduring value of blockbuster game franchises as the industry recovers from a prolonged downturn.

The deal could also herald a comeback of massive leveraged buyouts, which fell out of favor after several major deals executed in the years before the Global Financial Crisis ended in disaster. Among these was the record $45 billion takeover of Texas utility TXU Energy in 2007 that wound up in bankruptcy just seven years later.

The EA deal "waves the green flag on sponsors resuming mega-deal transactions following several years of fishing for opportunities down market due to market headwinds such as higher borrowing costs," said Kyle Walters, private equity analyst at PitchBook.

EA shareholders will receive $210 per share in cash, a premium of 25% over the September 25 closing price of $168.32, before reports of a deal emerged, giving it an equity value of about $52.5 billion, according to Reuters' calculations. The company's shares rose 5% in midday trading to about $202.54 a share.

The take-private offer comes at a crucial time for EA, which is banking heavily on its core sports portfolio and action shooter intellectual property to weather a sluggish videogame industry as gamers get picky with spending.

"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," analysts at Freedom Capital Markets wrote in a note to clients on Monday.

Electronic Arts is gearing up to launch the much-awaited "Battlefield 6" in an industry where gamers stick to proven and recognizable titles.

Still, "while the $210 per share offer price may appear compelling … we believe it falls materially short of the company's intrinsic value. With Battlefield 6 about to launch and a pipeline that could add more than $2B in incremental bookings by FY28, the true earnings power of EA is only beginning to emerge," Benchmark analysts said.

The company's sports portfolio has stood out for over a decade due to its global popularity and consistent recurring revenue as strong in-game spending patterns remain key for the franchise's longevity.

The deal also has big appeal for Saudi Arabia's wealth fund as part of the kingdom's plans to diversify its economy away from oil by pouring billions in sectors including infrastructure, tourism, sports and gaming.

Kushner, who is married to US President Donald Trump's daughter Ivanka, started Affinity Partners in 2021. The firm has investments from funds in , Qatar and the United Arab Emirates.

The transaction is expected to close in the first quarter of fiscal year 2027 with $18 billion of the debt financed at closing. It will remain in Redwood City, California with CEO Andrew Wilson remaining at the helm.

The previous LBO record holder, the $45 billion takeover of Texas utility TXU Energy in 2007 by private equity firm KKR & Co., alternative asset manager TPG and Goldman Sachs, went bankrupt in 2014. The leveraged buyouts of Toys "R" Us and Hertz also had rough goes.

Toys "R" Us filed for bankruptcy in 2017 about a dozen years after Bain Capital and KKR bought the retailer for $6.6 billion. Rental car company Hertz did not survive the pandemic, filing for bankruptcy in 2020 after going private for $14.8 billion in 2005.

EA must pay a $1 billion fee if it terminates the merger due to a board reversal, accepts a higher bid, or pursues another deal within a year of a shareholder rejection.

The consortium owes the same amount if regulatory delays push completion past September 28, 2026, or if it breaches the agreement.