The ink is barely dry on the Electronic Arts takeover and the Saudi sovereign wealth fund is already thinking about the next step — and it's a distinctly ambitious one. According to a Bloomberg report, the Public Investment Fund (PIF) is considering bringing EA together with Savvy Games Group, its vast games-focused holding company. The deal could create one of the biggest players in the industry, gathering licences such as Madden NFL, Battlefield, The Sims and even Pokémon Go under a single banner. The aim would be first and foremost to better coordinate the various investments Saudi Arabia has made in the sector. The PIF is said to be looking at creating a single structure capable of acquiring new studios and publishers, developing games and making the most of their intellectual property.
The Empire Strikes Back
But this power grab actually hinges on another major acquisition. Savvy Games first has to complete its purchase of Moonton, the Chinese publisher best known for titles such as Mobile Legends Bang Bang, in a transaction valued at around $6 billion. An EA–Savvy tie-up would be particularly interesting for the mobile side of the business. Electronic Arts has historically been strongest on console and PC, while Savvy has gradually built up a genuine mobile portfolio. The Saudi group bought Scopely for $4.9 billion and Niantic's games business for roughly $3.5 billion. A merger would therefore let the PIF pool those strengths within a single entity, while potentially giving EA more firepower to push on in a mobile market where the publisher has had its share of setbacks in recent years.
A deal that's bound to be closely watched
The plan comes just a few months after Electronic Arts was bought by a consortium led by the PIF, Affinity Partners and Silver Lake. Valued at $55 billion, the deal became the largest leveraged buyout in history and took EA private for the first time in three decades. And however much the Electronic Arts takeover is presented as a joint effort by Saudi sovereign wealth fund the PIF, Silver Lake and Affinity Partners, in practice it is Saudi Arabia that now holds the reins at the American publisher. The PIF alone owns around 93% of EA, making it the company's real boss. Silver Lake and Affinity Partners mainly served to get the deal over the line and smooth its passage past the various regulators. In other words, now that the $55 billion buyout has been digested, Riyadh wields considerable clout over one of the industry's biggest publishers.
The acquisition has also raised questions about the publisher's future, not least because of the roughly $20 billion in additional debt attached to the deal. Cost cutting, redundancies and possible studio closures could all be on the table in order to ease that financial pressure.
Should the PIF ultimately decide to merge EA and Savvy, the deal would in any case have to clear several regulatory hurdles. A tie-up on that scale, in an already heavily concentrated industry, could well attract the attention of competition authorities, as happened with Microsoft's purchase of Activision Blizzard. But what really emerges from this latest thinking is Saudi Arabia's long-term strategy in gaming. Driven by Crown Prince Mohammed bin Salman, the sector has become one of the pillars of the country's economic diversification under Vision 2030. And with EA on one side and Savvy on the other, the PIF now has enough assets to consider assembling the pieces of a puzzle that could produce a global gaming giant.
