Electronic Arts Went Into Debt To Buy PopCap

[lord.jeff]

Doesn't seem like that big of news a lot of gaming companies are commonly in debt, like anytime they make a video game.

 

[manythings]

What's actually coming out before TOR? Right now I can't think of anything.

Some kind of battle game...that may or may not take place in a field. Also, it has something to do with the number three. I don't know, apparently it's pretty popular with the kids these days.

Yeah, I'd like to know what this is too.

God damn kids on my hobby's lawn.

 

[tomtom94]

Well their goes another gd team into the furnace of EA.

Do your research properly: PopCap's autonomous under the deal, if they fail it's on their own failings.

I'd say this is more like Disney's acquisition of Pixar, and add that if this doesn't help EA recover then nothing will.

 

[-|-]

Why is this news?

Corporations do stuff like this all the time. There are lots of reasons why companies with large asset/cash bases will take on debt to make acquisitions.

 

[Kaymish]

ive seen many people saying going into debt is a bad idea it is not necessarily bad sure you have to pay interest on the debt but in the current climate and being able to prove they are able to pay the debt off will net them a low interest rate from whoever is giving the loan
and if that interest rate is lower than the interest rate for their on hand cash they are making a smart move
my company does this sort of thing all the time its not news

 

[thethain]

Number one rule of investing. Why spend your money, when you can spend someone else's?

 

[RA92]

Tell that to Origin, Bullfrog, Westwood or Maxis...

Ah, Westwood... I wonder how Petroglyph is doing.

I've got to be honest: I honestly think EA, for a while now, have been abandoning common sense in a mad drive to try and buy up as much of the industry as possible. It's like they're envious of Activision being number one, and are doing everything they can to try and top them. They've also been spending quite frankly ludicrous amounts of money in order to buy up studios, only to completely cock things up. The most obvious example is spending $800 million to buy Bioware and Pandemic, only to close down Pandemic (essentially turning it into an $800 million purchase just for Bioware). Spending half a billion to purchase another publisher is an equally audacious move, especially as they had to borrow the money for it in the first place.

Don't forget spending over a hundred million dollars for the BF3 ad campaign just to dethrone CoD. Or spending another hundreds of millions of dollars on TOR to dethrone WoW. Or trying to dethrone Steam on the DD front.

So many risks on so many fronts. EA has gone... bonkers.

 

[Lenriak]

Oh no, Popcap Casual games + project $10 = an awful Zynga-like monster that I'll be staying clear of

I hope it doesn't happen... I hate Zynga but I don't mind Popcap.

 

[Kuckles]

EA is gonna use that extra cash they have left to buy out our respect...

 

[Low Key]

I'd be shocked and appalled by EA's business practices if what they did wasn't so common. Business go in the red more often than you'd think when acquiring new assets, because those assets are supposed to generate even more revenue.

 

[Atmos Duality]

Really EA, is Plants vs Zombies really worth that much?

It could be more of them taking popcap for their back catalogue to add a low cost library to the Origin market.

Precisely that.
This serves two purposes:
1) Pads out Origin's inventory of games; making it appear to be worthwhile
2) Inserting themselves (EA) as a middle man for Popcap's titles and keeping them out of everyone else's hands. Exclusive sale and distribution rights for very popular games.

 

[Zaik]

Wouldn't this be more appropriate if it was titled "Electronic Arts borrows tons of money to buy Popcap"? I mean, it says plainly in the article that they had more than enough money to actually buy them, just opted to take out a confusing loan. Saying they "went into debt" suggests they went into the red to do it.

Though, I guess that would be a lot less sensationalist. If that's what you were going for, mission accomplished.

 

[Thumper17]

This is how it ends then? Buyin out a company that made one half decent game that fell out of popular status years ago for 750 MILLION dollars?

 

[Nurb]

EA going bankrupt, now we just need Ubisoft and Activision to follow. If they don't it's going to be a 2 publisher monopoly

 

[JPArbiter]

Crap, I have seen this before. Company goes into debt to by a smaler but profitable company, Milks it for cash on hand and any IP. it then purchases an asinine level of debt and declares a special dividend to stockholders (typical dividend is anywhere from a nickel to a quarter a share. this would be like 2 bucks a share). Finally SPin back off the company you just purchased with an IPO, and part of that spin off is the debt incurred to purchase and declare dividends. its free money for EA.

 

[DarkHuntress]

It's all about putting more games on iPad. They probably will use PopCan for that. As for going into debt to make the purchase, why not? It's no big deal for them and it won't hurt their balance sheet one little bit. Save the cash for a major investment.

 

[fundayz]

How is this news? Companies do this all the time, specially with big investments...

 

[duchaked]

huh...that's crazy. but hey PopCap is still laying the golden eggs so they aren't exactly in the under-performer under-the-axe category...at least not anytime soon

and Plants Vs. Zombies is awesome...a sequel would be nice :]