Wall Street Journal: Disney could buy EA
EA to be bought out? By Disney?! Well, the world’s turned upside down anyway, so why not this? The Wall Street Journal speculates that with EA’s stock down by 18 percent last Friday, the time could be right for bigger fish who are looking to expand their presence in the gaming market to swallow EA whole.
The word “ironic” comes to mind.
When we read news like this it’s usually EA that’s looking to assimilate some small game developer, adding its uniqueness into their (EA’s) own.
However, with the company’s stock down by 18 percent last Friday from disappointing second quarter earnings, the time could be right for bigger fish who are looking to expand their presence in the gaming market to swallow EA whole.
Chief candidate: Disney, says the Wall Street Journal.
Mind you, this is only speculation on the part of the WSJ and not based on any credible sources. At least, none that they cared to share with us.
“Disney makes the most sense,” said a WSJ article by Martin Peers.
Of course, almost any entertainment industry would love to get their hands on EA despite its recent financial problems, but WSJ points to Disney as a great fit.
EA’s biggest assets include its sports games, such as Madden NFL, which would fit with Disney’s ESPN cable network. Disney also could save at least part of the roughly $200 million it spends annually developing its own games.
Although several years ago, EA was valued at around US$19 billion, they have since dropped to a more “affordable” US$ 7.3 billion. Now we’re at the point where Disney could afford it. Peers writes:
At June 30, its net debt was $11 billion, roughly 1.2 times Pali Research’s estimate of 2008 earnings before interest, tax, depreciation and amortization. Also, Disney’s stock has massively outperformed EA’s this year. At a 40% premium, EA would cost $7.7 billion excluding the cash notes the WSJ. Disney would be gutsy to step up during the current economic uncertainty. But it might be better than waiting for better times and paying top dollar.
Personally, I very much doubt anyone is going to be throwing around that much money on that big a risk given the current economic crisis.
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Via WSJ.com