EU Clears Saudi-Led $55 Billion EA Buyout, But Deal Still Not Done – WGB
The proposed $55 billion takeover of Electronic Arts cleared another major hurdle, with the European Commission approving the deal under the EU Merger Regulation.
In a brief statement published today, the Commission said the transaction would not raise competition concerns due to its limited impact on the markets in which the companies operate. The acquisition was evaluated under the standard merger review process and was approved without conditions.
However, this helps not means EA is now bought. However.
The European Commission is still considering the discovery under the Foreign Subsidies Regulation, which is designed to prevent companies from using financial support provided by non-EU member governments to gain unfair advantage. A decision on that separate review will be made on July 30, although Reuters reported last week that the deal is expected to win approval there as well.
In other words, the sale is not over yet, but someone is already stretching the tape.
As I mentioned a few days ago, EA agreed last September to be acquired and taken private by a consortium that includes Saudi Arabia’s Public Investment Fund, private equity firm Silver Lake and Jared Kushner’s Affinity Partners.
Calling it a consortium-led acquisition is technically correct, but perhaps gives a slightly misleading impression of three nearly equal partners. After the takeover, PIF (that’s Saudi money) is expected to own approximately 93.4% of EA. Silver Lake will hold about 5.5%, while Affinity Partners will own the remaining 1.1%. The European Commission’s own notice describes PIF as acquiring “sole control” of EA, so calling this a Saudi takeover is hardly an outrageous simplification.
I remain unsure that any of this is particularly good news. The games industry has spent years putting its biggest publishers and developers in the hands of a few, very wealthy people. EA being part of another large investment empire means one large company that operates independently, and will come with about 20 billion in debt used to finance its acquisition. That doesn’t inspire warm, fuzzy thoughts about creative freedom or job security.
There is also the inevitable issue of Saudi Arabia itself. Human Rights Watch accused the PIF of promoting and profiting from human rights abuses, while describing the country’s investment in sports and entertainment as attempts to cover up its record. Concerns about controlling The Sims, EA Sports FC, Battlefield and Mass Effect are therefore understandable.
Do I expect that EA games will suddenly be forced to reflect Saudi Arabia’s deeply conservative social values? Probably not. Saudi authorities enforce strict rules at home while state-controlled money happily pours into international entertainment that doesn’t follow them. These investments seem designed to generate money, influence and positive attention; Product interference can undermine all three.
That does not make ownership harmless. It means that the immediate threat to EA studios is probably a lot of debt and a demand for refunds, rather than someone ordering BioWare to card every Mass Effect character.
For now, EA remains a publicly traded company and its takeover remains incomplete. But with EU merger approval already in place and its separate funding review reportedly heading towards the same outcome, this is starting to look less like a question of if sales will happen and more like a question of when.
