8-KMaterial AgreementsRegulation FDExhibits & Filings

ELECTRONIC ARTS INC. 8-K Report, Material Agreement (Jul 12, 2011)

Filed July 12, 2011For Securities:EA

Summary

On July 11, 2011, Electronic Arts Inc. (EA) announced a significant strategic move with the definitive Agreement and Plan of Merger to acquire PopCap Games, Inc., a leader in social and mobile gaming. The acquisition is structured with an initial payment of approximately $650 million in cash and $100 million in EA common stock to PopCap's founders and CEO. Additionally, up to $50 million in equity awards will be granted over four years for retention. A substantial earn-out provision of up to $550 million in cash is also included, contingent on PopCap achieving certain non-GAAP EBIT performance milestones through December 2013, indicating EA's strong belief in PopCap's future earnings potential. To finance this acquisition, EA has secured a commitment letter for a $550 million one-year unsecured term loan Bridge Facility. This acquisition signals EA's strategic intent to bolster its presence in the rapidly growing social and mobile gaming markets, leveraging PopCap's established brands and player base. The transaction is subject to customary closing conditions, including regulatory approval, and is expected to close by October 11, 2011.

Key Highlights

  • 1EA enters into a definitive Agreement and Plan of Merger to acquire PopCap Games, Inc.
  • 2Total potential acquisition cost includes approximately $650 million in cash, $100 million in EA stock, and up to $50 million in equity retention awards.
  • 3A significant performance-based earn-out of up to $550 million in cash is tied to PopCap's EBIT through December 2013.
  • 4EA has secured a commitment for a $550 million, one-year Bridge Facility to finance the cash portion of the acquisition.
  • 5The acquisition aims to strengthen EA's position in the social and mobile gaming markets.
  • 6The transaction is subject to customary closing conditions and a termination date of October 11, 2011.

Frequently Asked Questions

The initial purchase price at closing is approximately $750 million (composed of $650 million in cash and $100 million in EA stock). In addition to this, there is a potential earn-out of up to $550 million in cash based on performance, and up to $50 million in long-term equity retention awards. The total potential consideration could reach approximately $1.35 billion if all performance targets are met.

EA has secured a commitment for a $550 million one-year unsecured term loan Bridge Facility to fund a portion of the cash consideration and related expenses. The remaining cash portion of the initial payment will likely come from EA's existing cash reserves or other available financing.

The earn-out payment is variable and contingent upon PopCap achieving certain non-GAAP earnings before interest and tax (EBIT) performance milestones. The maximum earn-out is $550 million, with the full amount payable if PopCap generates approximately $343 million in stand-alone EBIT over the two-year period ending December 31, 2013.

The acquisition is subject to customary closing conditions, including the expiration of the Hart-Scott-Rodino waiting period. The Merger Agreement can be terminated if the transaction is not consummated by October 11, 2011, indicating this as the target closing timeframe.