In a significant move within the gaming industry, Silver Lake, a tech-focused buyout group, has been eyeing Electronic Arts (EA), the renowned developer behind blockbuster franchises like Battlefield and Madden NFL. This spring, during a brainstorming session, discussions led by Silver Lake's co-CEO Egon Durban and U.S. President Trump's son-in-law Jared Kushner culminated in what is now recognized as the world's largest leveraged buyout.
On September 30, 2023, Silver Lake announced a staggering $55 billion deal, which is set to significantly expand its portfolio in gaming, sports, and entertainment. This acquisition is notably backed by the Saudi Arabia Public Investment Fund (PIF), which will emerge as EA's majority shareholder. Kushner's private equity firm, Affinity Partners, is expected to hold a 5% stake in the company. Sources indicate that discussions began with an approach to EA in the summer, with PIF already owning nearly 10% of the company prior to this deal.
Jared Kushner, who founded Affinity Partners in 2021, has garnered investments from various funds in the Middle East, including those from Saudi Arabia, Qatar, and the UAE. In the deal announcement, Kushner expressed his personal connection to EA, sharing that he grew up enjoying their games and plays them with his children. According to Durban, EA holds a unique position in the market, and the consortium is committed to investing heavily to enhance the business globally and foster innovation.
Saudi Crown Prince Mohammed bin Salman has a clear vision for the kingdom's future in gaming and esports, aiming to establish Saudi Arabia as a global hub for these sectors by 2030. In previous statements, he highlighted the lucrative nature of esports, with annual profits ranging between 15% to 25%, emphasizing the importance of this investment. This acquisition is not merely a financial transaction; it represents a strategic move for Saudi Arabia to enhance its cultural influence and technological capabilities in the gaming industry.
The PIF has already made substantial investments in various gaming companies, including stakes in Activision Blizzard and Nintendo, as part of the broader Saudi Vision 2030 initiative aimed at diversifying the economy away from oil dependency. With EA's strong portfolio of franchises, the PIF sees this acquisition as a valuable opportunity to bolster its gaming capabilities and possibly develop a robust gaming industry in Saudi Arabia.
As part of its ambitious goals, Saudi Arabia has announced plans for a new esports tournament for national teams, partnering with EA to enhance local gaming culture. Additionally, Qiddiya, a mega-project in Riyadh, aims to attract millions of visitors to its esports and gaming district by 2030, further reinforcing Saudi Arabia's commitment to becoming a major player in the global gaming landscape.
The consortium's investment of $36 billion in this acquisition, including PIF's pre-existing stake, is supported by $20 billion in debt financing provided by JPMorgan. This financing is facilitated by a limited number of lucrative deals in the leveraged loan market, as many private equity firms have remained on the sidelines in recent years. EA shareholders will receive $210 per share, representing a 25% premium over the stock's closing price prior to the announcement.
While some analysts view the offered price as insufficient, they acknowledge EA's potential for growth. The merger agreement allows for a 45-day window for other bids to come forward, but experts like Joost van Dreunen believe that matching this deal would be a challenge due to the financial scrutiny involved. The acquisition will require regulatory approval, but analysts suggest that the current positive relations between the West and Saudi Arabia will likely result in a smooth review process.
As the gaming industry continues to evolve, this monumental acquisition by Silver Lake and the PIF marks a transformative moment, positioning both entities at the forefront of the gaming and entertainment sectors.
