Saudi Arabia to Own 93.4% of Electronic Arts Following Acquisition, Reveals Regulatory Filing

Saudi Arabia's Near-Monopoly Stake in Electronic Arts Revealed in Regulatory Filing

In September of last year, news that Electronic Arts (EA) was to be acquired by three investment funds—two American and one Saudi, the Public Investment Fund (PIF)—led some to believe the shares would be fairly distributed. However, according to a Wall Street Journal regulatory filing, the Saudi PIF would acquire 93.4% of EA, a near-monopoly stake rivaling the 96.18% stake it acquired in SNK (a purchase made in 2020 but only publicly revealed in 2022). The other two investors, Silver Lake and Affinity Partners (the fund of Jared Kushner, Donald Trump's son-in-law), would receive much smaller stakes: 5.5% and 1.1%, respectively. Given Saudi Arabia's existing partnerships with these American firms and PIF's prior investments in them, this distribution, while lopsided, is not entirely unexpected.

Acquisition of Electronic Arts by Saudi PIF - Timing Amidst Industry Consolidation and Transitional Period for EA

The $36.4 billion capital injection, combined with $20 billion in debt, makes this deal the largest leveraged buyout (LBO) in history. After deducting its existing stake, the PIF would contribute approximately $29 billion. The Saudi fund's existing investments in Nintendo, Capcom, TakeTwo, Nexon, Activision, and SNK underscore the video game industry's importance to Crown Prince Mohammed bin Salman. The disproportionate nature of this investment, where Riyadh is providing almost all the financing for what was initially presented as a balanced consortium, has surprised some observers. Despite CEO Andrew Wilson's October statements promising that EA's values would remain unchanged, this now seems uncertain. Why This Acquisition Now? Electronic Arts is currently in a transitional period. Sales have stagnated between $7.4 and $7.6 billion over the past three years, the boom caused by the COVID-19 pandemic has ended, and the gaming industry is rapidly consolidating through mergers and acquisitions. Going private would allow EA to avoid quarterly market pressures and reinvent itself away from the public eye, contingent on funding from the Saudi PIF.

The PIF's motivations include diversifying the Saudi economy, expanding its cultural influence, and supporting Vision 2030. Even with declining liquidity, partly due to the massive NEOM megaproject, video gaming remains a strategic sector. EA, with franchises like FIFA, Madden, Apex Legends, and The Sims, represents a significant cultural asset. The immediate impact of the acquisition on game releases like Battlefield, EA Sports FC, and Dragon Age is expected to be minimal. However, in the long term, strategic orientations may become more centralized, with governance heavily influenced by a single investor whose priorities may diverge from the Western market. Whether promises of unchangeable values will hold true remains to be seen. Several factors further contextualize this acquisition: Affinity Partners holds a 1.1% stake in Electronic Arts. Furthermore, the Saudi PIF also owns shares in other major gaming companies, including Nintendo, Capcom, Nexon, Embracer Group, and Niantic (the developer of Pokémon Go), although these investments are smaller than the EA deal. The overall value of the Electronic Arts buyout is approximately $55 billion.

Foreign Sovereign Fund's Potential Control of Electronic Arts and Warner Bros. Discovery Shapes Global Entertainment Landscape

The buyout has not yet been approved, but should it proceed, Electronic Arts will become one of the largest entertainment companies fully controlled by a foreign sovereign wealth fund. Given Mohammed bin Salman's efforts to reshape international perceptions of Saudi Arabia, the acquisition also carries broader implications. Meanwhile, the industry is also awaiting news of the Warner Bros. Discovery acquisition, in which Saudi Arabia also has a stake, potentially giving the country control of a major American film studio. These developments suggest a shifting global landscape.

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