The Saudi Public Investment Fund’s $55 billion acquisition of Electronic Arts could create a seismic shift in the video game industry, both in Saudi Arabia and abroad.
The deal, led by the $930 billion fund, along with private equity companies Silver Laker and Affinity Partners, the company of President Donald Trump’s son-in-law Jared Kushner, will be the second-largest buyout of a video game company in history, after Microsoft paid $69 billion for Activision Blizzard in 2023.
Should the deal go through – and the markets think it will – the PIF will gain control of the sixth-largest video game company in the world, responsible for titles such as The Sims and Call of Duty. EA dominates the sports games markets through favourites such as EA FC (formerly Fifa), EA Madden NFL and EA F1.
EA has increasingly relied on these to provide regular annual returns with minimal risk, despite grumbles by fans that the company has become less adventurous when it comes to game development.
PIF’s interest in EA goes beyond its bottom line. Under the stewardship of Crown Prince Mohammed bin Salman – a gamer himself – PIF has pledged to spend $38 billion to build up the gaming and esports market in Saudi Arabia.
It has not released a statement about the acquisition and did not respond to requests for comment, but its other activities suggest that it might be more interested in making games than making money.
The Saudi wealth fund and its investment partners are set to buy at a share price of $210 – a 25 percent mark-up – and turn EA into a private company.
“It’s a good deal for the shareholders,” said Joe Bonner, an analyst at Argus Research. Shares have already jumped past $200 in anticipation of the deal going through next summer.
PIF and its partners will acquire a “unique asset”, Bonner says: “Essentially the largest independent publisher-distributor of video games.”
Saudi Arabia has been forthright in its ambition to become a major player in the world of video games. According to Saudi Arabia’s National Gaming and Esports Strategy, it hopes to create 39,000 local jobs by 2030 and for gaming to contribute SAR50 billion ($13 billion) to GDP annually. Buying EA could be the biggest step towards realising that goal.
With the deal finalised, the PIF would be in a position to influence the world of video gaming beyond the shores of Saudi Arabia, says Nick McKay, managing director at investment bank Freedom Capital Markets. “They now have one of the crown jewels [of gaming],” he said.
The PIF has already amassed a portfolio of video game assets, including a 4.2 percent stake in Japanese games and electronics company Nintendo and a 6.2 percent stake in developer Take Two Interactive. It has an existing 9.9 percent stake in EA, and paid nearly $5 billion to acquire Scopely, a mobile games company. But the latest deal is worth more than all its previous investments combined.
“This is a game-changer in terms of what their profile is going to look like,” McKay said.
The deal faces the prospect of US government scrutiny, although the association of Kushner has done much to reassure investors, he said.
For fans of EA games, there is now the question of what direction the company will take under new ownership. The prospect of a private equity buyout has raised concerns among gamers that the developer might double down on the cautious approach it has taken in recent years, focusing predominantly on its stable of reliable franchises than new ventures.
“If you think about the company that released 30 to 40 video games a year, now they’re down to like five games that really matter per year,” McKay said. “You don’t see them step outside of those core sports games too often.”
Further reading:
- PIF prepares for ‘leaner, meaner, but more profitable’ future
- Investors go all-in as Saudi card game Baloot moves online
- Riyadh to host Esports Nations Cup next year
Under the terms of the deal, EA will go from being a debt-free company to one dealing with $20 billion of debt.
Given its extra financing obligations, EA’s new owners may proceed cautiously, continuing its existing strategy, which allows it to publish big sellers annually with low risk of failure. It is a strategy that some fans have bemoaned as staid and boring, but which gives PIF the chance to recoup its investment and bring development for tried and tested games to Saudi Arabia.
Conversely, the acquisition could mark a break in this trajectory. Chaired by the Crown Prince, PIF might take a more adventurous approach than other would-be private investors. The fund could decide that the larger goal, of putting Saudi Arabia on the video gaming map, justifies some risk taking.
“This is a passion play by the PIF,” McKay said. “I think it’s going to give EA more flexibility to pursue video game development.”
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