EA buys PopCap for $750 million+

Publisher expects to close on Bejeweled, Peggle maker next month, possible $550 million more in bonuses; Q1, FY financial guidance updated.

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Rumors flew in late June that Electronic Arts was in late-stage discussions to acquire casual gaming stalwart PopCap Games for an eyebrow-raising $1 billion. As it would turn out, those rumors weren't far off.

PopCap is worth a heap of diamonds.
PopCap is worth a heap of diamonds.

Today, EA announced plans to purchase PopCap for $650 million in cash. The deal, which is expected to close by the end of August, also sees EA paying out $100 million in shares to "certain stockholders of PopCap." EA also intends to offer some $50 million in employee retention awards.

Additionally, PopCap has been extended a sizable performance-related earn-out that could potentially increase the purchase price. Should PopCap generate in excess of $343 million in revenue by the end of 2013, EA will pay out an additional $550 million. If PopCap's earnings come in at $200 million, that payout would drop to $275 million, while $110 million in revenue would yield $100 million. Anything less than $91 million would result in no additional compensation.

"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."

PopCap is perhaps best known for its Bejeweled franchise, which has sold more than 50 million units since first release in 2000. The most recent installment, Bejeweled 3, arrived for the PC in December and is expected to hit other platforms later this year. The Washington-based studio has also found success with such franchises as Peggle, Zuma, and Plants vs. Zombies.

Beyond trumpeting its deal with PopCap, EA also preannounced its first-quarter earnings for the April-June quarter. Net revenue for the quarter ended June 30 came in between $975 million to $1 billion, beating company guidance of $900 million to $950 million. EA also said that diluted earnings per share will come in between $0.63 to $0.66 versus guidance of $0.44 to $0.53.

EA also raised its full-year guidance for the earnings period ending March 31, 2012. The publisher now expects to bring in $3.725 billion to $3.95 billion as compared to previous guidance of $3.7 billion to $3.9 billion. However, diluted earnings per share was revised down to a range of -$0.04 to +$0.26.

PopCap is the latest in EA's social- and casual-gaming buying spree. In November 2009, the company scooped up Facebook game publisher Playfish in a deal worth up to $400 million. Then, in October 2010, it netted Angry Birds publisher Chillingo for $20 million. Reports also emerged today that EA had acquired Ohai for a small sum.

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