More Shopping for EA, exit for Elevation: Electronic Arts buys Bioware and Pandemic
Electronic Arts, again under John Riccitiello, is a different animal than they were before he left in 2004. As a company, they’re now getting more streamlined, more efficient. They’re increasing their focus on alternative revenue streams (casual gaming, dynamic games, online gaming). They’re also increasingly breaking out a pen to sign a partnership or opening the checkbook to acquire assets.
Not even a weeks ago, EA bought SCI – bringing technology tools for online gaming. Now they’re acquiring content assets with the purchase of VG Holdings Corp. (“VGH”) – the owner of game studios Bioware and Pandemic.
Announced Thursday afternoon, EA will pay up to $620m in cash plus allocate up to $155m in equity for delivery subject to performance milestones. EA will also loan VG Holding Corp up to $35m through closing.
VG Holding Corp was owned by private equity firm Elevation Partners. Elevation invested more than $300m as part of an acquisition and merger that rolled the two studios into VGH. They’ll likely see a 2x return on their investment. It’s Elevations first liquidating event.
In an interesting twist, EA’s CEO John Riccitiello was, before rejoining EA, a founding partner at Elevation (other partners include Roger McNamee and Bono). Moreover, in that role, he personally negotiated the original deal that merged Bioware and Pandemic into VGH. As an interested party (he still has equity interests in Elevation) he had to recuse himself from negotiating this new deal, and similarly from voting on it as a member of EA’s board of directors. The Wall Street Journal reports he personally stands to gain as much as $4.9m from the deal through his Elevation interests.
Still, even with self interest to see this deal happen, Riccitiello, of all people, was equipped to know whether VGH was a worthwhile target for EA.
VGH currently has about 10 games under development. Six of them are wholly owned and four are subject to some form of license agreement. At least one of the titles is also an online massively multiplayer game (MMOG). Combined, the company has about 800 employees across North America and Australia.
EA expects the deal will reduce 2008 earnings by 30 to 40 cents. The deal will close in January subject to standard closing conditions.
