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Megaton Shocker: EA buys PopCap for $750 million

Tuesday, 12th July 2011 21:16 GMT By Staff

The biggest mushroom cloud we’ve seen for a long time: EA’s announced that it’s to buy Plants vs Zombies and Peggle creator PopCap for $750 million.

PopCap – A History

Founded in 2000 by John Vechey, Brian Fiete and Jason Kapalka.

First release was Bejeweled, which went on to win 25 industry awards.

Acquired Sprout Games and its Feeding Frenzy license in 2005.

PopCap International opened Dublin offices in 2006; PopCap games released on Steam.

Acquired SpinTop Games and Retro64 in 2007.

Revenue for 2010 came in at $100.

July 12, acquisition by EA Games announced.

An expensive, but lucrative purchase

The acquisition will cost $650 million cash and $100 million in stock.

EA CEO, John Riccitiello said in terms of digital, the firm pulled in $100 million in revenue during in calendar year 2010, 80 percent of which was in digital sales. Riccitiello said he feels PopCap was a great standalone business on its own without EA, so if it works already “don’t break it.”

“EA and PopCap are a compelling combination,” said Riccitiello. “PopCap has shown accelerated growth in both the social and causal markets.

“PopCap’s great studio talent and powerful IP add to EA’s momentum and accelerate our drive towards a $1 billion digital business. EA’s global studio and publishing network will help PopCap rapidly expand their business to more digital devices, more countries, and more channels.”

Riccitiello said since PopCap currently has around 450 personnel, most of the firm’s designers are stuck working on individual format carriers such as Andorid, and doing unproductive work for designers. EA has personnel who can do all the localization work, so “creators can create,” instead of being stuck doing menial work.

“By working with EA, we’ll scale our games and services to deliver more social, mobile, casual fun to an even bigger, global audience,” added PopCap CEO, David Roberts.

PopCap games coming to new platforms and markets

As part of the deal, EA will be bringing Plants vs. Zombies, Bejeweled and Zuma to “new platforms and markets,” although no details have been given as yet. Riccitiello said the firm has not “put a lot of thought into the Origin end” of the deal, but did say he is pleased with the firm’s ability to make use of bandwidth options, which is something EA has been “trying to figure out,” since it started in the social and causal market.

EA’s reaffirmed its Non-GAAP guidance for Q1 FY12 and full-year FY12 despite the buyout. Also, because PopCap was its own entity, “It will continue to have accelerated margin operation growth before EA factors into its financials.”

During an investor call following the announcement of the deal, EA was asked if it could hand out a product pipeline for PopCap, but it refused, saying it tends to not hand out dates for online games for competitive reasons.

Rumours of the deal has been circulating for weeks, with reports suggesting that a buyout would cost as much as $1 billion.

Shares in EA fell 3.4 percent to $23.35 a share after the announcement. The regular session for today’s shares were down 0.9 percent before the announcement it would purchase PopCap.

The major players speak out

EA has published in full an internal memo to employees discussing the acquisition.

Riccitiello revealed that PopCap had “received a lot of offers” but chose EA in “recognition of [its] culture” of “respect” for “games and the teams that create them”.

“There is no denying that what we announced today was a business transaction,” he said. “The deal is compelling.

“Above all, we both put the quality of our games first.”

“Beyond the business rationale, and the strategic rationale, I believe PopCap and EA share very, very similar cultural values. Above all, we both put the quality of our games first.”

Riccitello urged employees to make contact with and get to know their new colleagues.

“They are an incredibly talented group of people – but you already know that from playing their games,” he said.

“Where some companies are built on a single hit, PopCap has made lightning strike again and again. They have built a powerhouse of evergreen casual properties and proven their ability to create new hits again and again on the fastest growing platforms”.

“I think there will be changes in terms of expanding our reach,” PopCap’s Garth Chouteau told Kotaku of the possibility of PopCap’s transformation.

“We can work with a team at EA to do ports more quickly, more effectively. We have fairly modest development resources and there are ways that EA can bring some of its very substantial resources to bear.”

Chouteau stressed that EA has not imposed any schedule on PopCap, and said that the developer’s lengthy periods between new releases are due to limited porting resources rather than lack of ideas.

“We’re about as slow as it gets. I don’t think that changes materially. We devote a fraction of our overall development resources to new IP. We have more resources devoted to taking existing IP and bringing it to new platforms. I think that’s going to continue as-is.

“It’s all good, he concluded. “If anything, certain aspects of the way we do business just get easier and get bigger.”

PopCap also sent a cute letter of welcome to its new overlord; view in full below.

[Original story by Johnny Cullen, contributions by Stephany Nunneley and Brenna Hillier]

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34 Comments

  1. Stephany Nunneley

    Jesus. I think every single one of us is in the wrong business. :D

    #1 3 years ago
  2. DSB

    I guess it’s the time of year where EA throws money at every social developer under the sun.

    #2 3 years ago
  3. Patrick Garratt

    “Fuck me.”

    #3 3 years ago
  4. Dean

    > “The accusation will cost $650 million”

    *acquisition*

    #4 3 years ago
  5. Grimrita

    EA want to be number #1 on every platform and since they cant create their own talent, they have to buy it, then decimate it. They are the Borg of the gaming industry

    #5 3 years ago
  6. AHA-Lambda

    fuc…king…helll!!! =O

    GIGGAA-TTTTOOON!!!!

    srsly, didn’t see this one coming a mile off O_O

    PS: better go buy some popcap games from steam quick before they disappear ;P

    #6 3 years ago
  7. Erthazus

    Jesus Christ. Thats too much.

    Pop Cap should have stayed independent.

    #7 3 years ago
  8. deathgaze

    * Price inflated to adjust for 2011 Internet financial bubble.

    #8 3 years ago
  9. Fin

    NOM NOM NOM NOM

    I like EA, so I’m not bothered by this – I am a bit concerned the games might be taken off Steam though, hmmmmm.

    #9 3 years ago
  10. Erthazus

    but whats the point if their revenue is only 100$+ million a year?

    I doubt that they can do better then that.

    #10 3 years ago
  11. Johnny Cullen

    Properly went :O. That’s a genuine megaton.

    #11 3 years ago
  12. jacobvandy

    How is this a surprise? There was a rumor weeks ago that this was going on, you guys may have even posted about it then. I forget who “debunked” it, saying it wasn’t EA who was buying, but turns out they were wrong.

    #12 3 years ago
  13. Patrick Garratt

    @10 – 7.5x revenue is a decent deal for both sides, I reckon. I assume PopCap’s very profitable, so it seems sensible. It just seems like a massive amount of money for EA at the moment.

    I’m glad I said publicly about 10 times this was all complete horseshit.

    #13 3 years ago
  14. deathgaze

    @10 and 13: The point is that Pop-Cap has a sustainable and profitable business model. Even EA admits that revenue in the game-space can be unpredictable. Buying Pop-Cap helps further round out EA’s financials as well as their market portfolio.

    I would classify this as a “good move”.

    #14 3 years ago
  15. Patrick Garratt

    @14 – *nods*

    #15 3 years ago
  16. loki

    Another proof: EA’s direction -idiots

    #16 3 years ago
  17. DSB

    It is really crazy though.

    After the Playfish fiasco, betting half a years revenue on another social project? Granted, they got the best of the best with this one, but I’m surprised that Popcap went for it as well.

    Then again I have no idea how much money 750 million is, and if you’ve built an empire on little games that a handful of guys can put together, then that has to be somewhat satisfying.

    #17 3 years ago
  18. Prof.Dr.Moertel

    geeez, that´s a whole lot of money. If PopCap can keep or even increase their revenue over the next 10 years or so, it´s a great deal. But otherwise it´s a complete disaster for EA. But since I don´t see any sign of decreasing business for those kind of games, it seems to be a fucking amazing deal.

    #18 3 years ago
  19. darksied

    @5
    … EA is a publisher. They don’t have “talent,” like you say. They go “buy” the talent in the form of developers, yes. This, I believe, is what all publishers do. And if you really want to talk about the Borg, I think you’re looking at the wrong company. EA buys and expands into different types of stuff; Activision buys, uses, destroys and moves on.

    #19 3 years ago
  20. darksied

    I can’t even think about that number … if you think about how much you make a year, and think about how long you’re going to work … wow. It’s amazing how much money people can throw around.

    #20 3 years ago
  21. The_Red

    Wow… seriously, wow. I really hope this isn’t the end of fun games like PvZ and Peggle. They may be casual or small but they are really well made. In an age where quality of most the casual games is on par with garbage (xxxxVille), their titles were like water in desert.

    #21 3 years ago
  22. Stephany Nunneley

    Okay. Added a few extra bits from the call in there. Nothing major was announced like dates, games, or whether anyone will get laid off.

    #22 3 years ago
  23. DSB

    @19 You’re not serious are you? Do you have any idea how many people they fired from Playfish? And how do you think Pandemic feel?

    EA has always gone through the motions of massive investments, followed by huge cuts as soon as they realize that they’ve overextended themselves. Last time they fired almost 20% of the company.

    People are just statistics to any business of that size, including the ones who buy their games. Whether they do good or evil is of no consequence, they do whatever they can to make money.

    #23 3 years ago
  24. Erthazus

    New game is announced!!!!

    http://cache.gawker.com/assets/images/comment/9/2011/07/93fe85dba8c3e88df0f6647835bacbdc/original.jpg

    first Screenshot.

    #24 3 years ago
  25. Johnny Cullen

    Pegglefield and Plants vs Zombies vs Mass Effect all due in a year. Calling it.

    #25 3 years ago
  26. Erthazus

    @25, Need For Weeds

    #26 3 years ago
  27. Fin

    @25

    I would buy those games.

    #27 3 years ago
  28. NeoSquall

    @19 Well duh, the Borgs capture and assimilate the best features of their preys in the collective, so considering EA the Borgs of the gaming industry isn’t entirely wrong…

    #28 3 years ago
  29. hitnrun

    No more Peggle/WoW crossovers, I guess.

    OTOH, Yoda confirmed as Peggle Master character in Old Republic Peggle.

    #29 3 years ago
  30. TheWulf

    @25

    Pfft. my money’s on Boo™: Miniature Giant Space Hamster – Caretaker.

    #30 3 years ago
  31. NightCrawler1970

    I don’t get it, EA SHUT DOWN 17, what they called aged servers, but wasting $750 Million dollars for buying “pop-cap” JESUS what a waste…

    #31 3 years ago
  32. Maximum Payne

    @31 IF they had added little bit more money they could bought yahoo :)

    #32 3 years ago
  33. MrBambinoDent

    I think this is a nice move on EA’s side and it may help pop-cap seriously expand their business.
    I’m glad about this piece of news : )

    #33 3 years ago
  34. NightCrawler1970

    @32, why need EA Yahoo???? doesn’t make sence…
    @33, Easy for you to say, not your money 750 Million wooooh, where i come from that’s a lot of money….

    #34 3 years ago

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