EAs $55bn sale to Saudi-led group closes — $700 million in cuts on the horizon

Electronic Arts has successfully completed its $55 billion sale to a Saudi-led group, marking the end of the gaming giant's 36-year run as a publicly-traded company. The transaction, finalized on August 4, saw the company taken private and handed over to a group led by Saudi Arabia's Public Investment Fund (PIF) and investment firm Affinity Partners, led by Jared Kushner.

All EA stockholders, including many employees, will receive $210 per share in the sale. As part of the agreement, the company plans to cut $700 million in annual costs, with $170 million of that tied to "organizational efficiencies," or as Jason Schreier from Bloomberg succinctly put it, "mass layoffs." Despite this, EA's annual EBITDA remains around $1.5 billion, which should be sufficient to cover the interest payments on the debt.

The company is set to take on $18 billion in debt for the transaction, with an estimated annual interest cost of $1.8 billion. The sale ranks as the largest leveraged buyout in history, with PIF borrowing $20 billion from JPMorgan on top of its $36 billion commitment. Industry watchers have expressed concerns over the company's high debt load, suggesting potential mass layoffs, aggressive monetization, and further cost-cutting measures.

Critics also question the deal's impact on EA's creative direction, fearing it could lead to more sequels and mega-franchises at the expense of its broader catalog. Additionally, the deal has drawn attention to Saudi Arabia's human rights record, with concerns over potential censorship and reduced free speech in EA's games, particularly those featuring LGBT+ relationships.