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EA execs provide more details on BioWare, Pandemic deal

In a conference call to investors, EA CEO John Riccitiello and CFO Warren Jenson gave a more detailed explanation of the company's deal to acquire BioWare and Pandemic

In a conference call to investors, EA CEO John Riccitiello and CFO Warren Jenson gave a more detailed explanation of the company's deal to acquire BioWare and Pandemic.

"We've looked at a lot of companies and have had our eye on these studios for several years," said Jenson. "Together these studios represent one of the most prolific and high quality creative organisations in the industry."

"We have not seen many opportunities that bring so many high potential assets together under one roof."

EA noted that these studios had 10 titles in development, 6 of which are wholly-owned.

Jenson pointed out that the upcoming Mass Effect title, to be published by Microsoft, is an IP owned by BioWare, as is Jade Empire. Pandemic's owned IP include Mercenaries and Full Spectrum Warrior.

Pandemic's other notable titles, Star Wars: Battlefront and Destroy All Humans, are owned by LucasArts and THQ, respectively.

"This acquisition fills up a gap in our genre line-up," said Jenson. "We are currently underrepresented in key genres: RPG, action, and adventure."

Jenson noted that these genres represented 36 per cent of the North American market and 29 per cent of the European market. He also indicated that the acquisition would provide EA with an entry into the MMO space, with BioWare working on an as-yet-unannounced title.

Q4 earnings are expected to be diluted by USD .05 per share. For fiscal 2008, EA expects the acquisition to be dilutive in the range of USD .30 to .40 per share on a GAAP basis due to the non-recurring acquisition costs.

Jenson expects a break-even point in fiscal 2009.

EA expects Pandemic and BioWare to bring in USD 300 million in revenue in both 2009 and 2010, providing the company with solid long-term financial returns.

From fiscal 2010 onward, Jenson said that the acquisition would be solidly accretive. He noted that, were it not for an existing relationship, the deal would have been accretive in fiscal 2009.

EA already has a publishing agreement on Pandemic's upcoming Mercenaries title as well as two unannounced titles.

CEO John Riccitiello told investors that he had a residual interest in Elevation Partners, which is why the acquisition was handled by an independent audit committee.

Although Riccitiello did not discuss his personal stake in the acquisition any further, EA has filed form 8-K with the SEC indicating that he could earn as much as USD 4.9 million from the deal.

As to what BioWare and Pandemic stand to gain, Jenson referred to EA as the "world's best publishing organisation. We reach places they don't get," he said, making reference to EA's online and mobile business.

"We're excited about what this acquisition brings to EA, what it brings to our shareholders, and what it brings to our customers," said Jenson in closing.

The total cost of the acquisition is expected to be USD 860 million, with the close of the deal scheduled to occur in early January 2008.

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