• Breaking news today as Electronic Arts has announced that they are acquiring Pop Cap Games, a leading provider for mobile, tablets, PCs and social network sites.  Some of Pop Cap’s most popular titles have also found their way on to the home consoles as well.

    “EA and PopCap are a compelling combination,” said EA CEO John Riccitiello. “PopCap’s great studio talent and powerful IP add to EA’s momentum and accelerate our drive towards a $1 billion digital business. EA’s global studio and publishing network will help PopCap rapidly expand their business to more digital devices, more countries, and more channels.”

    “We picked EA because they have recast their culture around making great digital games,” said David Roberts, CEO of PopCap. “By working with EA, we’ll scale our games and services to deliver more social, mobile, casual fun to an even bigger, global audience.”

    “PopCap has a proven financial trajectory with sustained revenue growth and double-digit operating margins,” said EA CFO Eric Brown. “On a non-GAAP basis, this deal is expected to be at least ten-cents accretive in fiscal year 2013.”

    EA will pay approximately $650 million in cash and $100 million in shares of EA common stock to be issued to certain stockholders of PopCap. In addition, the PopCap sellers are entitled to additional variable cash consideration, contingent upon the achievement of certain non-GAAP earnings before interest and tax (“EBIT”) performance milestones through December 2013, EA’s third fiscal quarter end.

    The transaction and financial highlights include:

    • The transaction is expected to close in August 2011, subject to customary closing conditions, including regulatory approvals.
    • On a non-GAAP basis, the acquisition is expected to be EPS neutral to EA’s fiscal year 2012 results, as a result of one-time transaction costs, and at least $0.10 accretive to EA’s FY 2013 non-GAAP EPS.
    • For the first quarter of fiscal year 2012, EA is announcing preliminary results of approximately:
      • $500 million to $525 million in non-GAAP revenue versus guidance of $460 million to $500 million of non-GAAP revenue.
      • ($0.40) to ($0.37) in non-GAAP diluted loss per share versus guidance of ($0.49) to ($0.44) in non-GAAP diluted loss per share.
    • EA is reaffirming its full year fiscal year 2012 non-GAAP guidance of $0.70 to $0.90 diluted earnings per share. EA is also increasing its full year non-GAAP revenue guidance to a range of $3,800 million to $4,025 million to account for the inclusion of PopCap for a portion of FY12.
    • EA is announcing preliminary guidance for the second quarter of fiscal year 2012 of non-GAAP diluted loss per share ranging from ($0.15) to ($0.05).
    • EA has executed a commitment letter for a $550 million senior unsecured bridge facility with Morgan Stanley Senior Funding, Inc., J.P. Morgan Securities LLC, J.P. Morgan Chase Bank, N.A., UBS Securities LLC, and UBS Loan Finance LLC, that EA may choose to draw upon prior to closing the acquisition. EA expects to explore permanent financing options in connection with the funding of this acquisition. Morgan Stanley & Co. LLC provided EA’s board of directors valuation advice in connection with the transaction. EA was also assisted by UBS Investment Bank.

    PopCap is one of the largest and most respected digital and social gaming companies with more than 150 million games installed and played worldwide on platforms such as Facebook®, RenRen, Google™, iPhone™, iPad™ and Android. In calendar year 2010, approximately 80% of PopCap’s revenue was on high growth digital platforms.

    What are your thoughts about EA purchasing Pop Cap?

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