Electronic Arts, the leading publisher of games on Console, PC and Mobile has outbid rival Take-Two Interactive to buy Dirt 5 publisher Codemasters Group in a deal that values the acquired company at $1.2 billion. The deal upstaged a previous transaction agreed between rival publisher Take-Two Interactive and Codemasters. The firm had agreed to acquire Codemasters for £726 million ($971 million) just last month.
This all cash offer is more proof that consolidation is heating up in the games industry, which saw around $20.5 billion in deals in the first nine months of 2020. The deal is subject to shareholder approval.
The gaming sector has seen a flurry of deals across all platforms over the past year, led by Microsoft Corp.’s $7.5 billion deal for ZeniMax Media Inc., the owner of the storied video-game publisher Bethesda Softworks, which is behind games such as The Elder Scrolls, Doom and Fallout. San Francisco-based Zynga Inc. also acquired mobile developer Peak for $1.8 billion, creating Turkey’s first gaming unicorn.
Back in November, Take-Two announced that it had bid $973 million to buy Codemasters. But the United Kingdom-based maker of racing games wasn’t done with the bidding process until EA came into the spotlight. Under the deal, EA will pay $7.98 a share for each share of Codemasters, with an implied enterprise value of $1.2 billion. The deal is expected to be done in the first quarter of 2021.
“The Codemasters Board has considered various aspects of the EA Offer and considers the EA Offer to represent a superior offer for Codemasters’ shareholders as compared with the Take-Two Offer,” the British firm said in a release.
Codemasters makes racing games such as F1, Dirt, Project Cars, and Grid. Based in Southam, England, Codemasters has about 750 employees.
“Electronic Arts and Codemasters have a shared ambition to lead the video game racing category. The Board of Codemasters firmly believes the company would benefit from EA’s knowledge, resources and extensive global scale – both overall and specifically within the racing sector. We feel this union would provide an exciting and prosperous future for Codemasters, allowing our teams to create, launch and service bigger and better games to an extremely passionate audience,” said Gerhard Florin, the chairman of Codemasters, in a statement.
EA said that the combination of the racing franchises of both sides (EA makes Need for Speed) will bring more expertise to future titles.
“We believe there is a deeply compelling opportunity in bringing together Codemasters and Electronic Arts to create amazing and innovative new racing games for fans,” said EA CEO Andrew Wilson in a statement. “Our industry is growing, the racing category is growing, and together we will be positioned to lead in a new era of racing entertainment. We have admired Codemasters’ creative talent and high-quality games for many years. With the full leverage of EA’s technology, platform expertise, and global reach, this combination will allow us to grow our existing franchises and deliver more industry-defining racing experiences to a global fan base. We are pleased that both our boards of directors are recommending this transaction.”
EA believes it can help accelerate Codemasters’ performance by leveraging EA’s expertise in live services operations, game analytics, and technology. In addition, EA’s central services teams across development technology, art and motion capture, quality verification, compliance, and localization will all be resources available to Codemasters. EA will also lend its global publishing, marketing, and game development support to Codemasters. And Codemasters will help EA grow the number of games it can offer in its subscriptions.
Frank Sagnier, CEO of Codemasters, and Rashid Varachia, chief financial officer of Codemasters, along with the senior executive management team of Codemasters, intend to remain with Codemasters following completion of the acquisition.
The video-game boom caused by the pandemic is expected to send industry revenue up 20% this year to $174.9 billion, outstripping earlier forecasts and dwarfing the market’s growth in 2019.
The projected revenue, which includes mobile, console and personal-computer games, will climb three times faster than last year, according to estimates from research firm Newzoo. The forecaster had to make the biggest-ever adjustment in its outlook to account for the bump from the pandemic.