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EA Pares Gains After Retraction of Report on Amazon Prepping Bid

·3 min read

(Bloomberg) -- Electronic Arts Inc. found itself the subject of takeover speculation on Friday, sending its shares up as much as 16% in early trading before the report was walked back and other news outlets refuted the possibility of an imminent deal.

A report published in USA Today by GLHF -- a gaming and esports site and content partner of USA Today’s For the Win column -- said Amazon.com Inc. could announce as soon as Friday an offer to acquire EA, the publisher of hit games Apex Legends, FIFA and Madden titles. The news sent EA’s shares surging early Friday morning before David Faber cast doubt on the report on CNBC following its publication. Later, USA Today added a note at the top of the original story saying that it “violated our editorial standards regarding the use of unnamed and unvetted sources,” and the language about a pending announcement had been removed.

EA and Amazon declined to comment on the report. EA shares were up 4.9% at 11:56 a.m. in New York, valuing the Redwood City, California-based company at $37 billion.

It has been a banner year for deals in the video game industry, from Microsoft Corp.’s pending $69 billion purchase of Activision Blizzard Inc. to Take-Two Interactive Software Inc.’s acquisition of Zynga for $11 billion. The sector boomed during the pandemic and, although sales have slowed this year, gaming companies are still seen as attractive sources of long-term revenue thanks to titles that can be monetized for years after they launch. Live-service games, which are continuously updated over time, and microtransactions made within games accounted for 71% of EA’s revenue last fiscal year.

Amazon, too, has been on the hunt for deals this year, despite already being under intense antitrust scrutiny. Earlier this month, Amazon announced an agreement to buy iRobot Corp. for $1.65 billion, coming on the heels of a $3.49 billion deal just two weeks earlier to buy the One Medical chain of doctors offices.

With the consolidation in the gaming industry, EA has long been suspected of being a takeover target. Amazon, Apple Inc. and Walt Disney Co. have been mentioned as potential suitors.

Known for its Star Wars and sports games, EA has yet to release any major new titles this year and is still grappling with fallout from Battlefield 2042, which debuted last November to mediocre reviews and poor fan reception.

Amazon has failed to make much of an impact in gaming on its own, even after hiring industry veterans and buying the video game streaming service Twitch. EA has a suite of live-service titles such as Apex Legends and The Sims that could be appealing to the tech giant, especially after Netflix Inc.’s success with shows such as The Witcher and Arcane, which have been built around big video games. A deal could give Amazon franchises from the popular role-playing game developer BioWare such as Dragon Age, which is set for a Netflix animated series that was teased earlier this year.

EA has also dominated the sports sphere and regularly releases the most popular soccer and football games. Its FIFA franchise -- which will no longer be officially associated with the world football governing body following this year’s release -- sells millions of copies a year. It generates even more revenue with its FIFA Ultimate Team microtransactions, which brought in $1.62 billion during the company’s 2021 fiscal year.

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