Rumor: EA Facing Takeover Bid from Korean Giant

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Rumor: EA Facing Takeover Bid from Korean Giant

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South Korean MMO kingpin Nexon is looking to acquire studios, and one newspaper claims that it's looking to start with the big dogs.

If you're a publisher with a lot of cash at hand, you start looking into gathering more studios underneath your giant, money-laden umbrella. That's the case with Nexon, the Korean MMO publisher best known in the west for MapleStory, as it told Bloomberg that it was interested in acquiring Japanese mobile-game developers with its significant cash reserves.

However, a South Korean newspaper claims that Nexon has also contacted EA - yes, that EA - regarding a potential takeover bid. While this report does seem completely unsubstantiated, it had enough weight behind it to cause an increase of almost 6% in EA's stock prices.

It's unlikely that Nexon would be able to simply purchase the North American publishing giant in full. Even after a stellar IPO in Japan last year, Nexon only has about $1.5 billion in the bank. While you and I would probably love to "only" have $1.5 billion in cash, it's far below EA's market cap of ~$5.3 billion, meaning the best that Nexon could do would be a partial acquisition now with intent to finish the deal in the future.

Given the circumstances, this acquisition - if real - seems unlikely to move forward. If it did, however, it would give the Asian MMO powerhouse a partial claim to such noteworthy Western game series as Battlefield, Mass Effect, and Madden NFL. Nor does it mean that anything would necessarily change if it did - French conglomerate Vivendi acquired Activision in 2007 as part of the Activision-Blizzard merger, and the Call of Duty characters have yet to don so much as a single beret.

(Bloomberg, Edge Online)

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John Funk:
French conglomerate Vivendi acquired Activision in 2007 as part of the Activision-Blizzard merger, and the Call of Duty characters have yet to don so much as a single beret.

Except for all the French special forces in MW3, though I suppose you couldn't see the berets under the helmets. They were there though.

As to the topic? I don't really have an opinion on it. Not yet anyway. Would be interested to see the differences that occur if it does happen.

Wouldn't it be glorious if Bioware somehow regained its autonomy and spun out of EA as a result of this deal? If only business actually worked that way :(

Good thing I started buying EA's toilet paper when it hit 15.5 huh? Maybe the ride up won't be as nail biting as the ride down.... weeee it's like a video game.... where I get rich.

John Funk:
Given the circumstances, this acquisition - if real - seems unlikely to move forward. If it did, however, it would give the Asian MMO powerhouse a partial claim to such noteworthy Western game series as Battlefield, Mass Effect, and Madden NFL. Nor does it mean that anything would necessarily change if it did - French conglomerate Vivendi acquired Activision in 2007 as part of the Activision-Blizzard merger, and the Call of Duty characters have yet to don so much as a single beret.

Yep, nothing at all changed that day, it's not like they dropped their entire lineup around Brütal Legend, Ghostbusters, Riddick: Assault on Dark Athena, WET etc. to concentrate on "billion dollar franchises": http://www.gamasutra.com/php-bin/news_index.php?story=20984

With respect to the franchises that don't have the potential to be exploited every year across every platform, with clear sequel potential that can meet our objectives of, over time, becoming $100 million-plus franchises, that's a strategy that has worked very well for us.

Yeah... this isn't happening. EA makes money hand over fist. Why would they cash out to someone who can't buy them outright upfront? "Why yes, I would like to give you a cut of all my future profits for 1/4 my current worth!"

Nexon acquire EA? Oh no, please no, there's still a tiny sliver of hope that BFME3 will happen, but if Nexon ends up in control, I'm not sure I want to see the resulting BFME3...

Oh no! If that happened EA would lose all their artistic Integrity...

What?

Azuaron:
Yeah... this isn't happening. EA makes money hand over fist. Why would they cash out to someone who can't buy them outright upfront? "Why yes, I would like to give you a cut of all my future profits for 1/4 my current worth!"

That not how things work, EA is a publicly traded company and doesn't have much say in what investors do with their stock, they can either keep it or sell it off to a third party if they think there's more profit to be made from that. (e.g. Share price at the moment is 16$, if they offer 20-25$ per share buyout they might just take them up on the offer)
The party with a majority share of over 50% (or whoever owns the largest percent of stock) has the most say in how the company conducts itself and works in turn.

This is still highly unlikely, but for wholly other reasons. It would be delicious if it did happen though...

Not likely Koreans. Go back to Starcraft and your crappy MMOs.

Captcha: Of Course - we get crap memes in our captchas now?

Talk about worst case scenarios, you think EA is money grubbing now, wait until you have to pay money to unlock your gear for a month before you have to buy it again

It seems to me EA is more likely to devour the other company, being EA and all.

Vivendi owns Activision? Well I'll have to think my hatred of them over again, but come the fuck on, why did they hold onto the Homeworld IP for YEARS after THQ bought Relic and Vivendi did fuck all with it?

I hope this is just a rumor, Nexon expanding at all would just be horrifying.

They have worse user policy than any company I have seen.

Cash shop items THAT EXPIRE.

Something seems vaguely appropriate about a grindfest MMO publisher attempting to acquire a competitor by buying it out bit... by but... by bit...

Azuaron:
Yeah... this isn't happening. EA makes money hand over fist. Why would they cash out to someone who can't buy them outright upfront? "Why yes, I would like to give you a cut of all my future profits for 1/4 my current worth!"

Er you do know EA has been losing hundreds of millions of dollars for all but 1 quarter of the last 2 years.

Kumagawa Misogi:

Azuaron:
Yeah... this isn't happening. EA makes money hand over fist. Why would they cash out to someone who can't buy them outright upfront? "Why yes, I would like to give you a cut of all my future profits for 1/4 my current worth!"

Er you do know EA has been losing hundreds of millions of dollars for all but 1 quarter of the last 2 years.

Bullshit, I heard they've been raping the dreams of Mass Effect fans and whoring out Wrex for $16 a go.

HOLD THE IMAGINARY LINE.

WE CAN RELOCATE A PROPERTY WE NEVER OWNED

EA IS THE DEVIL

aww shit I'm drunk and I don't care for this shit. G'night escapist. Wankers, each and everyone of you, including myself.

Fappy:
Wouldn't it be glorious if Bioware somehow regained its autonomy and spun out of EA as a result of this deal? If only business actually worked that way :(

*Pictures a "Nexon" branded space shuttle violently crashing into a much larger "EA" branded space station at top speed, as a "bioware" branded escape pod zips away from the wreckage, descending towards planet "respectable business practice"*

Heh... I should write political cartoons.

Hookah:

aww shit I'm drunk

Damnit. Double post. Sorry. My bad.

This was supposed to be an edit to my previous one. kind of ruins the joke :(

well if this DID happen, maybe then Nexon could get some decent servers and do something about the hacker people are constantly pissing and moaning about on the forms

Dexter111:

John Funk:
Given the circumstances, this acquisition - if real - seems unlikely to move forward. If it did, however, it would give the Asian MMO powerhouse a partial claim to such noteworthy Western game series as Battlefield, Mass Effect, and Madden NFL. Nor does it mean that anything would necessarily change if it did - French conglomerate Vivendi acquired Activision in 2007 as part of the Activision-Blizzard merger, and the Call of Duty characters have yet to don so much as a single beret.

Yep, nothing at all changed that day, it's not like they dropped their entire lineup around Brütal Legend, Ghostbusters, Riddick: Assault on Dark Athena, WET etc. to concentrate on "billion dollar franchises": http://www.gamasutra.com/php-bin/news_index.php?story=20984

With respect to the franchises that don't have the potential to be exploited every year across every platform, with clear sequel potential that can meet our objectives of, over time, becoming $100 million-plus franchises, that's a strategy that has worked very well for us.

Well, it didn't become any more FRENCH, is what I'm saying. Slightly tongue-in-cheek, yes, but I'd seen some preemptive outrage about EA and its umbrella studios becoming more like Asian games when the direction of the parent company towards game development isn't much of a factor.

Also, you say that like Activision hadn't already been exploiting its major franchises.

Fappy:
Wouldn't it be glorious if Bioware somehow regained its autonomy and spun out of EA as a result of this deal? If only business actually worked that way :(

It would probably be worse under Nexon. Bioware would be forced to make shitty free-to-play MMORPG's.

Fappy:
Wouldn't it be glorious if Bioware somehow regained its autonomy and spun out of EA as a result of this deal? If only business actually worked that way :(

Stop getting my hopes up!

OT, if this happens, please kill Origin. Please.
Otherwise, I can't really see much room for opinion. If it happens it happens.

Innegativeion:

Fappy:
Wouldn't it be glorious if Bioware somehow regained its autonomy and spun out of EA as a result of this deal? If only business actually worked that way :(

*Pictures a "Nexon" branded space shuttle violently crashing into a much larger "EA" branded space station at top speed, as a "bioware" branded escape pod zips away from the wreckage, descending towards planet "respectable business practice"*

Heh... I should write political cartoons.

No you shouldn't. That 'cartoon' is obvious, simplistic and lacks depth.

For a true satirical cartoon, one needs to convey both the farcical nature and the complete serious nature in which politics is concluded. It needs to be both simplistic, complex, and obvious all in one. Read Steve Bell's If... series for perhaps one of the best examples.

Dexter111:

Azuaron:
Yeah... this isn't happening. EA makes money hand over fist. Why would they cash out to someone who can't buy them outright upfront? "Why yes, I would like to give you a cut of all my future profits for 1/4 my current worth!"

That not how things work, EA is a publicly traded company and doesn't have much say in what investors do with their stock, they can either keep it or sell it off to a third party if they think there's more profit to be made from that. (e.g. Share price at the moment is 16$, if they offer 20-25$ per share buyout they might just take them up on the offer)
The party with a majority share of over 50% (or whoever owns the largest percent of stock) has the most say in how the company conducts itself and works in turn.

This is still highly unlikely, but for wholly other reasons. It would be delicious if it did happen though...

That would be a hostile takeover. But it sounds like Nexon wants the EA board of directors to agree to being bought, which is not going to happen. And, still, they could only buy a quarter, probably less since once they start buying in that kind of volume the price would skyrocket, and that's assuming there are enough EA investors willing to sell.

Kumagawa Misogi:
Er you do know EA has been losing hundreds of millions of dollars for all but 1 quarter of the last 2 years.

Citation. Or, here, I'll do it for you. Looks like net profits in 2011 Q1 and Q2, and, if you look at their yearly data, you can see they've been steadily trending upward since a dip in 2009. I wish I could see full quarterly data for 2010, I bet they had a good quarter or two then.

Further, even if they are generally "losing" money, that doesn't mean much, as the board/CEO is still being given millions of dollars. Also, they have zero debt, which is pretty amazing. And, they seem to be "losing" money by buying properties, thereby increasing their assets, thereby increasing their revenues (you'll notice 2009 has the largest net loss, but the greatest revenues).

That being said, I'd be worried about a company posting 20% net losses for six years straight, but we can see that they aren't. Not only are they averaging around 10% net loss for the last six years, but they're steadily increasing their net income without decreasing revenues; they're spending less and making steady money, so their investments are paying off.

Generally speaking, a business doesn't want excess profits, anyway. Profits get taxed. A business wants to reinvest its revenue into assets and, after profits have been high, spend their "war chest" on acquiring new assets, which will then show a "loss" for a given quarter. Also, executive bonuses.

Regardless, if Nexon buys EA, they'll almost certainly replace the board of directors, and probably the CEO. And, since the board of directors and CEO are the ones who make the decision to sell (unless Nexon gets hostile), they don't have an incentive to do so as long as they, personally, are making money hand over fist (which they are; EA's CEO has been averaging $15.36 million per year for the last six years, and has been CEO for 15 years) OR Nexon is able to make them an amazing deal (which it can't).

Azuaron:

Dexter111:

Azuaron:
Yeah... this isn't happening. EA makes money hand over fist. Why would they cash out to someone who can't buy them outright upfront? "Why yes, I would like to give you a cut of all my future profits for 1/4 my current worth!"

That not how things work, EA is a publicly traded company and doesn't have much say in what investors do with their stock, they can either keep it or sell it off to a third party if they think there's more profit to be made from that. (e.g. Share price at the moment is 16$, if they offer 20-25$ per share buyout they might just take them up on the offer)
The party with a majority share of over 50% (or whoever owns the largest percent of stock) has the most say in how the company conducts itself and works in turn.

This is still highly unlikely, but for wholly other reasons. It would be delicious if it did happen though...

That would be a hostile takeover. But it sounds like Nexon wants the EA board of directors to agree to being bought, which is not going to happen. And, still, they could only buy a quarter, probably less since once they start buying in that kind of volume the price would skyrocket, and that's assuming there are enough EA investors willing to sell.

Kumagawa Misogi:
Er you do know EA has been losing hundreds of millions of dollars for all but 1 quarter of the last 2 years.

Citation. Or, here, I'll do it for you. Looks like net profits in 2011 Q1 and Q2, and, if you look at their yearly data, you can see they've been steadily trending upward since a dip in 2009. I wish I could see full quarterly data for 2010, I bet they had a good quarter or two then.

Further, even if they are generally "losing" money, that doesn't mean much, as the board/CEO is still being given millions of dollars. Also, they have zero debt, which is pretty amazing. And, they seem to be "losing" money by buying properties, thereby increasing their assets, thereby increasing their revenues (you'll notice 2009 has the largest net loss, but the greatest revenues).

That being said, I'd be worried about a company posting 20% net losses for six years straight, but we can see that they aren't. Not only are they averaging around 10% net loss for the last six years, but they're steadily increasing their net income without decreasing revenues; they're spending less and making steady money, so their investments are paying off.

Generally speaking, a business doesn't want excess profits, anyway. Profits get taxed. A business wants to reinvest its revenue into assets and, after profits have been high, spend their "war chest" on acquiring new assets, which will then show a "loss" for a given quarter. Also, executive bonuses.

Regardless, if Nexon buys EA, they'll almost certainly replace the board of directors, and probably the CEO. And, since the board of directors and CEO are the ones who make the decision to sell (unless Nexon gets hostile), they don't have an incentive to do so as long as they, personally, are making money hand over fist (which they are; EA's CEO has been averaging $15.36 million per year for the last six years, and has been CEO for 15 years) OR Nexon is able to make them an amazing deal (which it can't).

I don't completly understand business finances but if you post net losses for 4 years

(http://files.shareholder.com/downloads/ERTS/1826684202x0x481441/B553C9C1-EBFB-4E7F-A05F-26FD9960A910/Electronic_Arts-2011.pdf)(page 27)

and your assets shrink till nothing your screwed right?

Hookah:
Not likely Koreans. Go back to Starcraft and your crappy MMOs.

Starcraft is made by Blizzard.. And you are basically saying that EA makes great games..

image

FINALLY! EA could actually be run by somebody with a Seoul

John Funk:
Snip

Once...
Just ONCE
I'd like you guys to post an article when I'm actually ONLINE.
Or do you not even get-up before 12 o'clock eastern anymore?

Hookah:

No you shouldn't. That 'cartoon' is obvious, simplistic and lacks depth.

For a true satirical cartoon, one needs to convey both the farcical nature and the complete serious nature in which politics is concluded. It needs to be both simplistic, complex, and obvious all in one. Read Steve Bell's If... series for perhaps one of the best examples.

You do realize it was intentionally stupid, don't you? Thus the "heh" laughing at my own joke.

I don't even find political cartoons funny(or "deep", "complex", etc.).

Also, you used "simplistic" as both a criticism and praise in nearly adjacent sentences.

Hookah:
Not likely Koreans. Go back to Starcraft and your crappy MMOs.

Captcha: Of Course - we get crap memes in our captchas now?

Wow. You seem to be upset by the existence of individuals.

I feel you must be forewarned: the internet has many individuals.

DVS BSTrD:
FINALLY! EA could actually be run by somebody with a Seoul

image

OT: The initial image that popped into my head was a bunch of Koreans landing on the Death Star and walking up to Emperor Palpatine with suitcases of money in their hand. The image goes blurry after that.

Kumagawa Misogi:

Azuaron:

Dexter111:

That not how things work, EA is a publicly traded company and doesn't have much say in what investors do with their stock, they can either keep it or sell it off to a third party if they think there's more profit to be made from that. (e.g. Share price at the moment is 16$, if they offer 20-25$ per share buyout they might just take them up on the offer)
The party with a majority share of over 50% (or whoever owns the largest percent of stock) has the most say in how the company conducts itself and works in turn.

This is still highly unlikely, but for wholly other reasons. It would be delicious if it did happen though...

That would be a hostile takeover. But it sounds like Nexon wants the EA board of directors to agree to being bought, which is not going to happen. And, still, they could only buy a quarter, probably less since once they start buying in that kind of volume the price would skyrocket, and that's assuming there are enough EA investors willing to sell.

Kumagawa Misogi:
Er you do know EA has been losing hundreds of millions of dollars for all but 1 quarter of the last 2 years.

Citation. Or, here, I'll do it for you. Looks like net profits in 2011 Q1 and Q2, and, if you look at their yearly data, you can see they've been steadily trending upward since a dip in 2009. I wish I could see full quarterly data for 2010, I bet they had a good quarter or two then.

Further, even if they are generally "losing" money, that doesn't mean much, as the board/CEO is still being given millions of dollars. Also, they have zero debt, which is pretty amazing. And, they seem to be "losing" money by buying properties, thereby increasing their assets, thereby increasing their revenues (you'll notice 2009 has the largest net loss, but the greatest revenues).

That being said, I'd be worried about a company posting 20% net losses for six years straight, but we can see that they aren't. Not only are they averaging around 10% net loss for the last six years, but they're steadily increasing their net income without decreasing revenues; they're spending less and making steady money, so their investments are paying off.

Generally speaking, a business doesn't want excess profits, anyway. Profits get taxed. A business wants to reinvest its revenue into assets and, after profits have been high, spend their "war chest" on acquiring new assets, which will then show a "loss" for a given quarter. Also, executive bonuses.

Regardless, if Nexon buys EA, they'll almost certainly replace the board of directors, and probably the CEO. And, since the board of directors and CEO are the ones who make the decision to sell (unless Nexon gets hostile), they don't have an incentive to do so as long as they, personally, are making money hand over fist (which they are; EA's CEO has been averaging $15.36 million per year for the last six years, and has been CEO for 15 years) OR Nexon is able to make them an amazing deal (which it can't).

I don't completly understand business finances but if you post net losses for 4 years

(http://files.shareholder.com/downloads/ERTS/1826684202x0x481441/B553C9C1-EBFB-4E7F-A05F-26FD9960A910/Electronic_Arts-2011.pdf)(page 27)

and your assets shrink till nothing your screwed right?

Page 27 of the pdf has the changes to the employee stock purchase plan, and page 27 of the report has a half dozen citations. So I have no idea what you're pointing to.

You're assuming, for some reason, that their assets are shrinking to nothing. EA's assets are growing. It's why they're posting losses: they're acquiring assets. If their assets shrunk to nothing, so would their revenue. But they're revenue's holding steady.

Further, when you're looking to buy/sell a company, it's not just a matter of "are the posting net profits". It's, "What assets do they have? Are those assets making money? Do they have a war chest, and how much? Are they making more assets? Can they make payroll for the next year? Next several years? Are they becoming more profitable than they used to be?" And for EA, the answer to all of those is, "Yes." And, if you're considering selling the company, there's always, "Are they paying me boatloads of money every year that I don't want to lose?" (Yes.) There's also the issue of how much loss (compared to revenues) and where that money's going. If the executives are blatantly funneling money to their Florida beach houses, bad. But if it's going toward acquiring new assets, good.

Eventually, they'll have to start posting some net profits to rebuild their buffer. But, for now, they aren't burning through their cash reserves too quickly and they're becoming steadily more profitable every year.

It's actually kind of interesting, we can watch what happens with THQ. Most of the games they make are licensed franchises (most of which they're dropping), and their stock is in danger of being delisted. Sure, Saints Row is carrying them right now, and Warhammer isn't doing too bad, but they're in trouble. So, if someone (like EA, or Nexon) were to make a purchase offer...

But EA is certainly not in the same boat as THQ, and, with their rising profitability, I'm willing to make a slap bet with you that they will not be bought by anyone within the next three years.

JaceArveduin:
Nexon acquire EA? Oh no, please no, there's still a tiny sliver of hope that BFME3 will happen, but if Nexon ends up in control, I'm not sure I want to see the resulting BFME3...

EA no longer holds the liscence to make Lord of the Rings related games, therefore your tiny hope was suffocated under a pile of sand about... a year and a half ago.

gigastar:

JaceArveduin:
Nexon acquire EA? Oh no, please no, there's still a tiny sliver of hope that BFME3 will happen, but if Nexon ends up in control, I'm not sure I want to see the resulting BFME3...

EA no longer holds the liscence to make Lord of the Rings related games, therefore your tiny hope was suffocated under a pile of sand about... a year and a half ago.

But it can be buy it again. I knew they didn't, it's the reason the official servers went down ages ago. Unfortunately (unless I'm mistaken) They do hold the rights to the BFME franchise. They can't make/sale LotR related things without buying the rights, but no one else can make BFME things without getting the rights from EA. At least I'm fairly sure that's how it works. And with The Hobbit coming out, EA just might decide to try it again, just might.

Pipotchi:
Oh no! If that happened EA would lose all their artistic Integrity...

What?

Thank you for making my day.

OT; Meh its not like EA can get any worse.

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