American video game company Electronic Arts announced Monday that it would buy the mobile game studio Glu Mobile in an all-cash deal of $2.4 billion, widening its portfolio with the addition of games like “Design Home”, “Covet Fashion”, and “MLB Tap Sports Baseball”.
Consideration
Under the transaction, EA will be paying $12.50 in cash for each Glue share held, which represents a premium of around 33% to its closing price on Monday. The deal is expected to close in the quarter ending June 30 and gives Glu an enterprise value of $2.1 billion. Shares of EA were up 1.4% in extended trading while Glu shares jumped 34%.
Glu Mobile Portfolio
The San Francisco, California-based Glu Mobile is known for developing celebrity games including Kim Kardashian: Hollywood, Diner Dash: Adventures, Disney Sorceror’s Arena, WWE Universe, TapSports Baseball ‘20, Deer Hunter, and others. The games are free-to-play with microtransactions which also happens to be something that EA has been pursuing.
Strategic Benefit For Glu
According to a source, Glu received several takeover offers last year since its shares have been underperforming as compared to gaming peers. Post the acquisition by EA, Glu and its 800 employees will operate independently while developing titles based on EA’s intellectual property alongside their own projects. The company will also have access to EA’s marketing and distribution capabilities which could enhance the global presence of its own games.
EA’s Acquisition Spree
The Redwood City, California-based EA has been on a buying spree recently thanks to its strong balance sheet. In December, it acquired video game company Codemasters for $1.2 billion, defeating Take-Two interactive. Glu’s acquisition is one of the largest made by EA.
It purchased Plants vs. Zombies and Bejeweled developer Popcap games for $750 million back in 2012. The acquisition resulted in Plants vs. Zombies: Garden Warfare 1 and 2, and Plants vs. Zombies: Battle for Neighborville.
Pushing Into Mobile Games By Acquiring Glu
Acquiring Glu will clearly expand EA’s mobile games portfolio into sports, RPG, lifestyle, casual, and “midcore” games. The addition of casual games like “Kim Kardashian: Hollywood” will help in attracting more female gamers. Glu Mobile posted its game catalog revenue of over $1.32 billion in booking over the last year.
EA raised its revenue outlook earlier this month, based on strong sales of its sports games like “FIFA 21” and “Madden NFL 21”.
Growing Gaming Industry
As public events were canceled last year due to the pandemic, demand for virtual entertainment rocketed making videogame sales in the US soar to a record $56.9 billion, according to research firm NPD. According to Newzoo, global gaming sales jumped 13.3% last year.
Mergers
Over the last several years, the industry has seen expensive consolidations. Chinese conglomerate Tencent bought Clash of Clans developer, Supercell, for $8.6 billion in 2019 while tech giant Microsoft acquired holding company ZeniMax media for $7.5 billion in 2020. Microsoft also purchased Minecraft developer, Mojang, in 2014 for $2.5 billion while video game publisher Activision purchased Candy Crush developer, King, in 2016 for $5.9 billion.
Goldman Sachs, Morgan Stanley, and UBS Securities advised Glu on the transaction while J.P. Morgan advised EA.
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