EA Reaches $1.2B Deal To Acquire Codemasters, Countering Rival Take-Two's Offer

Electronic Arts Inc EA has struck an agreement to acquire Codemasters in a $1.2 billion deal, outshining an earlier offer from rival Take-Two Interactive Software Inc’s TTWO.

What Happened: Take-Two and the U.K. based game maker had entered into a $994 million acquisition deal in the second week of November.

The fresh $1.2 billion valuation that the EA deal assigns to Codemasters is almost 20% higher than Take-Two's estimate. Based on Codemasters closing price of GBX 534 on the London exchange on Friday, the new offer represents a 10% premium.

Electronic Arts will offer GBX 604 per share in cash (roughly $7.98 per share) to Codemaster shareholders. The company expects to complete the deal sometime in the first quarter of next year.

Why Does It Matter: The strategic acquisition will club Codemasters's racing franchisees like Formula One, DiRT, DiRT Rally, with the Need for Speed franchise and the fan-favorite Real Racing mobile game under one roof.

EA plans to drive a higher user engagement by combining its portfolio of racing games and sports games in its multi-platform subscription services. Additionally, the management anticipates a bump in net bookings, which in turn would boost profitability.

An analyst from private banking group Mirabaud told the Financial Times that if EA bid, Take-Two could "counter with a higher offer due to the long-term strategic value of Codemasters’ [intellectual property] and technology.”

Cloud gaming services attracted a lot of attention during the pandemic outbreak, especially after the entry of tech companies like Alphabet Inc GOOGL GOOG and Amazon Inc AMZN. These tech platforms are looking for tie-ups with game publishers for exclusive rights.

Price Action: EA stock closed 0.83% higher at $135.80 on Friday, whereas TTWO closed with a 1.27% gain at $190.21.

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Photo, courtesy of EA