EA to buy racing game gurus Codemasters for $1.2 billion

EA plans to buy Codemasters for a huge $1.2 billion in an effort to dominate the racing game market.

EA today confirmed its plan to purchase Codemasters, the UK-based game developer behind F1, Project Cars, and DiRT, for a whopping $1.2 billion. EA plans to buy out 100% of Codemasters stock at 604p (roughly $7.98) per share, but there's no details on how this will be paid out (e.g. stock and cash payments).

Grand Theft Auto publisher Take-Two Interactive originally made a bid on Codemasters. Take-Two was prepared to pay as much as $973 million to acquire Codemasters, but EA undercut Take-Two and exceeded the bid by some $273 million.

Codemasters stock spiked 22% to 655.92 today following the acquisition announcement. The buyout is a win-win for both companies: EA significantly expands its racing portfolio and Codemasters gets a cash influx, no longer has to worry about publishing/distribution deals, and gets access to high-end technologies and infrastructures to power its games.

EA expects the deal to close in early 2021.

"Electronic Arts and Codemasters have a shared ambition to lead the video game racing category. The Board of Codemasters firmly believes the company would benefit from EA's knowledge, resources and extensive global scale - both overall and specifically within the racing sector. We feel this union would provide an exciting and prosperous future for Codemasters, allowing our teams to create, launch and service bigger and better games to an extremely passionate audience," said Gerhard Florin, the Chairman of Codemasters.

"We believe there is a deeply compelling opportunity in bringing together Codemasters and Electronic Arts to create amazing and innovative new racing games for fans. Our industry is growing, the racing category is growing, and together we will be positioned to lead in a new era of racing entertainment. We have admired Codemasters' creative talent and high-quality games for many years. With the full leverage of EA's technology, platform expertise, and global reach, this combination will allow us to grow our existing franchises and deliver more industry-defining racing experiences to a global fan base. We are pleased that both our Boards of Directors are recommending this transaction, and we look forward to welcoming such an exciting and talented team to the Electronic Arts family," said Andrew Wilson, CEO of Electronic Arts.

Strategic Rationale:

• Electronic Arts believes the combination of EA and Codemasters will enable further growth and success for Codemasters and EA's popular and innovative racing franchises.
• Bringing together the combined expertise and talent from Codemasters' critically-acclaimed sports and racing franchises Formula One, DiRT, DiRT Rally, Grid and Project Cars with EA's global Need for Speed franchise, fan-favorite Real Racing mobile game and EA SPORTS brands will enable our teams to innovate further, and meaningfully increase the delivery of content and experiences to a growing, global audience for racing entertainment.
• Codemasters' deep creative talent which has produced high-quality racing games for many years, including the Formula One franchise that continues to deliver great entertainment for F1's growing fan base.
• EA believes it can help accelerate Codemasters' performance by leveraging EA's deep expertise in live services operations, game analytics and technology. In addition, EA's central services teams across development technology, art & motion capture, quality verification, compliance, and localization will all be resources available to Codemasters.
• EA's global publishing, marketing and game development support capabilities will also strengthen Codemasters' existing capabilities, expanding the addressable market for Codemasters' franchises.
• The combination of Codemasters and Electronic Arts will enable the development and delivery of a market-leading portfolio of creative and exciting racing games and content to more platforms and more players around the world.
• The union also creates ongoing and expanded ways for players to engage with the combined portfolio of sports and racing games through EA's industry-leading multi-platform subscription services.
• Bringing together Codemasters and Electronic Arts also delivers compelling financial benefit to the combined group. The acquisition is expected to grow net bookings and underlying profitability.
• Frank Sagnier, Chief Executive Officer of Codemasters, and Rashid Varachia, Chief Financial Officer of Codemasters, along with the senior executive management team of Codemasters intend to remain with Codemasters following completion of the acquisition and will continue to lead the Codemasters business within EA's organization.