REDWOOD CITY, Calif. - Seeking to fill gaps in its product lineup, video game publisher Electronic Arts Inc. said Thursday it will acquire two software studios from Elevation Partners in a deal worth $860 million, the largest in its history.
The studios, BioWare Corp. and Pandemic Studios, are known for their action, adventure and role-playing games. Elevation owns their parent, VG Holding Corp.
EA, the world's No.1 video game publisher, is known for blockbusters such as "The Sims" and "Madden NFL," but it has at times had less than 10 per cent of the lucrative market for role-playing, action and adventure games.
"These guys are powerhouses there, and this acquisition puts us in a strong competitive position now," Frank Gibeau, president of EA Games said in an interview.
Under the terms of the deal, EA will pay VG stockholders up to US$620 million in cash and issue as much as $155 million in equity to some of the company's employees. The shares will be subject to certain time- and performance-restricted vesting criteria.
Redwood City-based EA will also assume about $50 million in outstanding VG stock options and has agreed to lend VG up to $35 million until the deal closes.
Company officials declined to elaborate on the financial terms.
Prior to this deal, EA's largest acquisition was its $680 million purchase of mobile game publisher Jamdat Mobile Inc. in 2006.
BioWare and Pandemic have a total of 10 games under development. Together, they employ about 800 people in Los Angeles and Austin, Texas, as well as in Canada and Australia.
Microsoft Corp. is planning to publish BioWare's Mass Effect game next month, and the studio is in the early stages of developing a multiplayer online game, EA said. Pandemic is planning to release "Mercenaries 2: World in Flames" and "Saboteur."
"We did this deal because we think it's going to accelerate our growth dramatically," Gibeau said.
The acquisition, which is subject to customary closing conditions and regulatory approval, is expected to close in January.
EA expects the deal to lower its 2008 earnings by about 30 to 40 cents per share. EA shares fell $1.22, or 2 per cent, to close at $58.69 Thursday but regained $1.26 in extended trading following the news.
