Benzinga | Dec 14, 2020 03:48AM EST

EA Reaches $1.2B Deal To Acquire Codemasters, Countering Rival Take-Two's Offer

Electronic Arts Inc (NASDAQ:EA) has struck an agreement to acquire Codemasters in a $1.2 billion deal, outshining an earlier offer from rival Take-Two Interactive Software Inc's (NASDAQ:TTWO).

What Happened Take-Two and the U.K. based game maker had entered into a $994 million acquisition deal in the second week of November.

The fresh $1.2 billion valuation that the EA deal assigns to Codemasters is almost 20% higher than Take-Two's estimate. Based on Codemasters closing price of GBX 534 on the London exchange on Friday, the new offer represents a 10% premium.

Electronic Arts will offer GBX 604 per share in cash (roughly $7.98 per share) to Codemaster shareholders. The company expects to complete the deal sometime in the first quarter of next year.

Why Does It Matter The strategic acquisition will club Codemasters's racing franchisees like Formula One, DiRT, DiRT Rally, with the Need for Speed franchise and the fan-favorite Real Racing mobile game under one roof.

EA plans to drive a higher user engagement by combining its portfolio of racing games and sports games in its multi-platform subscription services. Additionally, the management anticipates a bump in net bookings, which in turn would boost profitability.

An analyst from private banking group Mirabaud told the Financial Times that if EA bid, Take-Two could "counter with a higher offer due to the long-term strategic value of Codemasters' [intellectual property] and technology."

Cloud gaming services attracted a lot of attention during the pandemic outbreak, especially after the entry of tech companies like Alphabet Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) and Amazon Inc (NASDAQ:AMZN). These tech platforms are looking for tie-ups with game publishers for exclusive rights.

Price Action EA stock closed 0.83% higher at $135.80 on Friday, whereas TTWO closed with a 1.27% gain at $190.21.

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Photo, courtesy of EA