EA Buys Game Studios For More Than $800 Million

Electronic Arts said on Thursday it is buying two video game studios for more than $800 million in a deal that fills a weak spot in its games lineup by adding role-playing and action titles.

Under the deal, EA will acquire BioWare and Pandemic Studios, privately held firms that have been partners since a 2005 deal brought them together under VG Holding Group with backing from private equity firm Elevation Partners.

Shares in EA rose as much as 1.3 percent to $59.44 in extended trading after the deal was announced. In the regular Nasdaq session the stock fell 2 percent to close at $58.69.

EA said the deal would be dilutive to its fiscal 2008 earnings by 30 cents to 40 cents per share. Excluding special charges, the purchase would reduce EA's earnings by about 5 cents a share in its fiscal fourth quarter, which concludes at the end of March.

It could also boost EA's revenue by more than $300 million a year, Chief Financial Officer Warren Jenson told Reuters in an interview.

"We're very excited about the revenue potential. We see that in both '09 and '10 to be in excess of $300 million," Jenson said. EA had just over $3 billion in revenue in 2007.

BioWare is the maker of a series of critically acclaimed and best-selling role-playing games, including Star Wars: Knights of the Old Republic and the Baldur's Gate series.

Pandemic makes military-style action and shooting games such as Mercenaries, Star Wars Battlefront and Full Spectrum Warrior.

"The reason we did this deal is because it's an incredible strategic fit with EA and there is an unbelievable collection of talent from BioWare and Pandemic," Frank Gibeau, head of EA Games, said in an interview.

"It also puts us in categories that we're not in right now," Gibeau said.