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- A Saudi Arabian investment group has invested $50 billion in Electronic Arts, which could potentially make the company privately owned.
- The main investor is Saudi Arabia’s Public Investment Fund (PIF). It already has money in other gaming companies, such as Nintendo and Niantic.
- The country is investing in the growing video game industry to make money and improve its global image.
A Saudi Arabian investment group has made a $50 billion investment in EA, potentially converting the company from a publicly listed to a privately held entity. Saudi Arabia’s sovereign wealth fund and other organisations have already made significant investments in the video game and esports industries, making this hardly surprising.
We’re specifically referring to the PIF (the Saudi sovereign wealth fund). The PIF’s subsidiary, Savvy Games Group, invests directly in video game and esports firms. Niantic, the developer of Harry Potter: Wizards Unite and Pokémon GO, is owned by PIF. It also owns around 8% of Nintendo and Take-Two, the parent company of Rockstar.
The investment group involved in this reportedly includes PIF, along with private equity firms Silver Lake and Affinity Partners, as well as Jared Kushner’s fund. More than $20 billion in debt managed by JPMorgan is expected to be used to finance the deal.
This acquisition will be a leveraged buyout. Buyers will finance the transaction primarily with borrowed money (debt), rather than their own capital. Of course, the purchased company’s assets and cash flow serve as collateral for the debt.
Therefore, EA’s future revenue will be utilised to pay down the debt gained through the acquisition. So we may claim that EA is in debt and will repay the acquired loan.
PIF already owns 9.4% of EA’s shares so that a buyout wouldn’t be surprising. The news of a potential acquisition agreement comes just days after EA launched Skate, which received a lukewarm reception from PC gamers.
Saudi Arabia aims to shift its economy towards technology, culture, and entertainment, which includes acquiring Electronic Arts. Investing in video games and esports is a new method to diversify your income.
The video game and esports sectors are among the fastest-growing industries, boasting strong profit margins and global scalability. Holding shares in significant corporations allows Saudi Arabia to profit from international expansion.
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Sajjad Hussain is the Founder and Editor-in-Chief of Tech4Gamers.com. Apart from the Tech and Gaming scene, Sajjad is a Seasonal banker who has delivered multi-million dollar projects as an IT Project Manager and works as a freelancer to provide professional services to corporate giants and emerging startups in the IT space.
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