“I’m sorry, I don’t speak poor…” - Electronic Arts 

Electronic Arts ripped faces off yesterday after the Wall Street Journal whispered that the company’s about to be taken private in a $50B buyout… a.k.a, the largest leveraged buyout in Wall Street history (beating the TXU buyout in ‘07, back when bankers were snorting subprime debt like Fun Dip). 

(Source: Giphy) 

“Oh cool, another gaming M&A headline?” they say after getting shafted by GTA’s horrific ability to keep timelines. Not quite. This isn’t just Microsoft scooping up studios… this is Toys “R” Us déjà vu. Case in point: The LBO crew at KKR and Bain loaded that company with $5B of debt, bled it dry, and left Geoffrey the Giraffe hanging from the rafters. The toy aisles didn’t die because kids stopped playing with toys. They died because private equity couldn’t resist milking the cow until the udders fell off. Now imagine that same playbook… except the “toys” are Madden packs and Sims expansion bundles.

(Source: CNBC) 

So with that doom and gloom scenario in the back of Wall Street's mind, who is at the table and even moreso, who has the audacity to buy out the only company that kept me out of trouble in middle school (if you weren’t playing Road to Glory, were you even living?)? Well, we have  Silver Lake, the Saudis via their Public Investment Fund (think: the same guys who brought you LIV Golf, Pro League soccer, and soon Wrestlemania 43 in Riyadh) and, because of course, Jared Kushner’s Affinity Partners.

The logic here is that EA’s market cap sits around $43B. So the deal prices them near $50B, which would imply “optimism.” Translation: they’re about to strap a debt bomb to the company and let EA itself hold the bag. If income falters, layoffs and studio closures are the only outcome. For instance, the home Andrew Anthony built has lost relevance over the years. Microsoft and Sony consolidated into gaming superstates while EA drifted, losing licensing rights and gutting RPG studios like BioWare (Spoiler: gamers never forgave them for it). Meaning, this LBO is basically a shot of Saudi adrenaline straight into a tired publisher’s veins.

(Source: Giphy) 

However, regardless of the obstacles ahead, EA still prints cash. They have The Sims, Madden, the rebranded “EA FC” after they lost FIFA, and a new Battlefield keeping a new generation of men stuck in their moms' basements. And for that reason, shares absolutely mooned 15% because of it. Plus, private ownership means less transparency… so now they can get away with quietly slash headcount, crank microtransactions harder, and worship the altar of EBITDA without any shareholder feedback. 

So yeah… that’s the good news for EA. Which is why this deal is 100% leverage on leverage on leverage. Silver Lake gets fees. Saudis get cultural real estate. Kushner gets… whatever Kushner gets. And EA gets to live inside a debt-fueled meat grinder until the bubble pops. But hey, it’s not our problem anymore. Shareholders are out… and private equity gets to hold whatever baggage EA has left. Translation: If you still believe EA ‘cares about its players’ after this, you haven’t been paying attention. Until next time, friends… 

At the time of publishing, Stocks.News holds position in Microsoft as mentioned in the article.