Popcap, the maker of successful entertainment games such as Plants V Zombies have been bought over by Electronic Arts, in a deal worth around £815 million.
EA have been aiming to compete in the ‘casual games’ sector, against Zynga and this move will help them enhance their portfolio. EA are paying around £385 million in cash and £63 million in common stock. They are also set to pay £345 million if PopCap achieve specific performance targets in around 2 years time.
EA have seen the potential market by offering cheap games to play on computers, mobile devices and Facebook. Popcap are already generating high volumes of income, claiming $100 million in revenue last year.
Eric Brown, the chief financial officer with Electronic Arts has said that this takeover helps them compete with Zynga. He said “This gives us a much stronger presence in social network games.”
While the move could be seen as positive, their shares fell as investors didn’t warm to the strategy change. Digital games make less money than packaged games – a stronghold for EA over the years.
EA also bought Playfish in 2009, which cost them several hundred million pounds at the time. Some shareholders feel that EA are spending a lot of money recently on expansion and that the prices aren’t competitive. Larry Haverty, associate portfolio manager of the Gabelli Global Multimedia Trust doesn’t agree and he said “Once Zynga comes out, this acquisition is going to look like the bargain of the century.”
EA are determined to generate $1 billion in revenue from their digital business. If PopCap release Plants V Zombies 2 in the near future, then this could easily be a possibility.
Kitguru says: A good deal for EA?