Unpacking EA's $55 Billion Sale To Go Private: What Does It All Mean?

"In a shocking development, Electronic Arts announced on September 29 that it will go private as part of a $55 billion leveraged buyout. Saudi Arabia's Public Investment Fund, Jared Kushner's Affinity Partners, and private equity company Silver Lake are taking 100% ownership of the company behind franchises like Battlefield, Mass Effect, Madden, and many others. Industries tend to consolidate over time as industries mature, and EA going private is just the latest example of such a move in the video game space."

"EA is going private as part of a leveraged buyout (LBO). What that means in financial parlance is that a company is using mostly borrowed money to finance a deal. Kade Barr of Wedbush Securities told GameSpot that you can think of it like taking out a loan to buy something expensive, but it's not you who is on the hook to pay it back. Instead, the company being acquired--in this case EA--will use its own earnings and assets to make the debt repayments."

Electronic Arts will go private through a $55 billion leveraged buyout led by Saudi Arabia's Public Investment Fund, Jared Kushner's Affinity Partners, and Silver Lake, transferring full ownership. Industry consolidation has been ongoing, with Microsoft buying Activision Blizzard, Take-Two acquiring Zynga, and Sony purchasing Bungie. A leveraged buyout uses mostly borrowed funds, with the acquired company repaying debt from its earnings and assets. Regulatory filings show EA will assume $20 billion in debt financing, the largest private equity LBO ever, surpassing the 2007 TXU $32 billion deal. EA reportedly generates about $2 billion in annual cash flow.

Read at GameSpot