EA's $55 Billion Saudi Buyout Faces Scrutiny Amid PIF Cash Crunch
Reports of financial strain at Saudi Arabia's sovereign wealth fund cast a shadow over the largest leveraged buyout in history, months after the landmark deal was announced.
Saudi Arabia's landmark $55 billion deal to take Electronic Arts private is facing fresh scrutiny amid reports of financial strain at the kingdom's sovereign wealth fund, casting a shadow over what is slated to be the largest leveraged buyout in history.
The all-cash deal, first announced in late September, would see a consortium led by the Saudi Public Investment Fund (PIF) acquire the video game titan for $210 per share. The price represented a nearly 25% premium at the time and sent EA shares soaring toward the offer price. However, recent reports in late November suggesting the PIF is tightening its pursestrings due to a cash crunch from other ambitious projects have introduced a new layer of uncertainty for investors.
As of Tuesday morning trading, shares of Electronic Arts (NASDAQ: EA) were trading at $202.97, just shy of the $210 offer price. The stock's proximity to the buyout price indicates that Wall Street still anticipates the deal will close, but the slight discount reflects potential risks and the lengthy timeline for regulatory and shareholder approvals, with a target closing date in the first quarter of fiscal year 2027.
The acquisition, set to be financed with approximately $36 billion in equity and $20 billion in debt, is a cornerstone of Saudi Arabia's "Vision 2030" plan to diversify its economy away from oil and establish itself as a global force in entertainment and technology. The PIF has already invested billions in the gaming sector, taking significant stakes in competitors like Nintendo and Capcom, and acquiring developers through its Savvy Games Group.
"The future for EA is bright," said Egon Durban, Co-CEO of Silver Lake, a partner in the acquisition consortium alongside Affinity Partners, in a statement when the deal was first announced. "We are going to invest heavily to grow the business, and we are excited to support Andrew and the EA team as the company accelerates innovation."
For Electronic Arts, the publisher of blockbuster franchises such as EA Sports FC, Madden NFL, and Apex Legends, going private offers an escape from the relentless pressure of quarterly earnings reports. Analysts have suggested that under private ownership, CEO Andrew Wilson, who is expected to remain in his role, would have greater freedom to make long-term investments in game development, artificial intelligence, and potentially expand EA's intellectual property into film and television.
The sheer scale of the transaction, which values EA's equity at over $50 billion, surpasses any leveraged buyout on record. Yet, the recent concerns over the PIF's liquidity highlight the complexities of executing such a megadeal. According to a report from GamesIndustry.biz, the fund is reportedly limiting new investments as its cash reserves run low, a development that could impact its ability to deploy capital for its numerous giga-projects and acquisitions.
While the funding for the EA acquisition is reportedly committed, any perceived financial weakness in its primary backer could create headwinds. The deal will require approval from regulators in the United States and other key markets, where the growing influence of sovereign wealth funds in strategic sectors like technology is drawing increased attention.
Before the recent news, the primary debate among analysts centered on valuation. Some argued the $210-per-share price undervalued EA's long-term potential, given its vast library of intellectual property and recurring revenue streams. Others saw it as a fair price that provides certainty for shareholders in a volatile market. Now, the conversation has shifted to deal risk and the financial capacity of its chief architect.
Investors will be closely watching for the shareholder vote and the progress of regulatory reviews. The outcome will not only determine the future of one of the world's most influential video game companies but also serve as a major test of the PIF's ambition to become a dominant player in the global entertainment landscape.