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EA is now "a great acquisition target" says analyst

Asif Khan of Panoptic Management Consultants believes Disney would be "a great fit for EA"

EA may be on the hunt to put more game companies under its umbrella, but ironically EA itself has been rumored to be a potential takeover target for Nexon. And while that rumor certainly seems flimsy, it doesn't negate the fact that "the company's stock is trading at depressed valuations and EA could be a great acquisition target for larger game and technology companies," Asif Khan, CEO of Panoptic Management Consultants told GamesIndustry International.

"With a market capitalization around $5 billion, it is clear that EA could be acquired in the near future. The technology industry is flush with cash, making an acquisition of EA more likely than in recent history," Khan noted.

So who would be the most likely to acquire a mega publisher like Electronic Arts?

"The usual suspects would be Microsoft, Sony, Activision Blizzard, Nintendo and maybe even Apple as a long shot. Seeing as Apple is holding onto its cash like a little kid with a blankey, I don't think they are a likely bidder," Khan continued. "Activision Blizzard would have to do a stock and cash deal for EA, so let's eliminate them as well. That leaves the big 3. Sony is in no position to make a large acquisition and Nintendo would most likely have a problem integrating a third party developer into their existing proprietary ecosystem. Lastly, Microsoft would bring on much regulatory scrutiny if they acquired EA. There is no doubt that an EA acquisition would make MGS a development juggernaut, but the anti-trust implications are high for any console maker that wants to buy EA. So lets eliminate Mr. Softy as well."

Ultimately, if EA is to be purchased, it's more likely to come from a company that hasn't traditionally been known for its games - a massive entertainment company like Disney, for example.

"Let's think outside the normal realm of gaming. I think Disney would be a great fit for EA. Putting EA Sports and ESPN under the same roof would lead to a number of great synergies. The combination of Disney IP with EA developers would create a huge content powerhouse and give Disney even more control over the quality of their games," Khan remarked.

A purchase of EA by Disney could also dramatically shake up the social games space.

"Combining Playdom and Playfish would definitely give Disney an upper hand against the likes of Zynga," said Khan. "With a market capitalization of $77 billion, Disney could easy swing a stock for stock deal for EA. EA is trading for 14 times forward earnings, 1.3 times sales, and at a 1 Price Earnings to Growth (PEG) rate. This is a relative bargain when compared to Zynga. Any company lucky enough to acquire EA would most likely benefit."

"It remains to be seen if this Nexon deal is for real, but it is clear that at current valuations EA is a takeover target."

What do you think GamesIndustry readers? Is an EA buyout likely in the next year or two?

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James Brightman avatar

James Brightman

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James Brightman has been covering the games industry since 2003 and has been an avid gamer since the days of Atari and Intellivision. He was previously EIC and co-founder of IndustryGamers and spent several years leading GameDaily Biz at AOL prior to that.

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