EA has announced it will borrow $550 million in order to raise funds for its acquisition of Popcap.
According to EA’s statement, a “portion” of the funding raised will be used to complete the purchase of PopCap, for which EA has offered $650 million in cash plus $100 million in stock. If the deal falls through, it intend to use the money for “general purposes”.
EA’s decision to borrow risks share price fluctuation as nervous investors assume the worst, but its tenacious hold on its cash pool suggests it might have near-future acquisitions in mind – a pretty safe bet, given its recent habits.
EA is calling for institutional buyers to take on senior convertible notes with the company, by market close on July 20. The notes will be largely frozen until April 2016, after which they’ll be redeemable for cash payouts or shares, which are currently valued at $31.74. EA will pay 0.75 percent interest per annum on the loans. An extra $82.5 million in notes is available above EA’s target of $550 million.