Electronic Arts shares surge on news of possible Amazon takeover

Electronic Arts Inc. surged in early trading Friday after a report said Amazon.com Inc. is preparing an offer to buy the US video game publisher.

According to a column in USA Today, Amazon could announce as soon as Friday an offer to acquire the publisher of hit games Apex Legends, FIFA and Madden titles.

The report, if true, would accelerate Amazon’s efforts to become a major player in the game industry.

EA shares surged as much as 16% in premarket trading before giving up some of those gains.

At market open, its shares had risen as much as 5.5% in New York.

The stock is down about 1% this year, valuing the Redwood City, California-based company at about $37 billion. David Faber cast doubt on the report on CNBC following its publication.

It has been a banner year for deals in the video game industry, from Microsoft Corp.’s pending $69 billion (R1.15 trillion) purchase of Activision Blizzard Inc. and Take-Two Interactive Software Inc.’s purchase of Zynga for $11 billion (R184 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 monetised for years after they launch.

Live-service games, which are continuously updated over time, and microtransactions made within games made up 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 (R28 billion), coming on the heels of a $3.49 billion (R58 billion) deal just two weeks earlier to buy the One Medical chain of doctor’s offices.

With the consolidation in the gaming industry, EA has long been suspected of being a takeover target. Amazon, Apple Inc., and the 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 the fallout from Battlefield 2042, which was released 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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Electronic Arts shares surge on news of possible Amazon takeover