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Electronic Arts (EA) to Outspend Take Two for Codemasters

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Electronic Arts (EA - Free Report) has agreed to acquire U.K.-based racing game developer Codemasters for an enterprise value of roughly $1.2 billion, outbidding rival Take Two Interactive’s (TTWO - Free Report) offer of about $994 million.

EA’s offer implies that Codemasters’ shareholders will receive 604 pence (roughly $7.98) in cash for each ordinary share. Take Two had offered 485 pence per share.

Undoubtedly, the transaction, anticipated to be completed in the first quarter of calendar 2021, will expand EA’s portfolio offerings.

Codemasters is popular for the DiRT and Formula 1 racing games. Combination of Codemasters racing franchises and EA’s Need For Speed as well as Real Racing mobile game are expected to boost user growth amid intensifying competition from the likes of Take Two, Activision Blizzard , Zynga and others.

Markedly, EA has underperformed the Zacks Toys-Games-Hobbies industry as well as Take Two, Activision and Zynga, year to date. While this Zacks Rank #4 (Sell) company has returned 28%, the industry gained 31.9%. Take Two, Activision and Zynga have returned 59.5%, 44.7% and 42.4%, respectively.

Year-to-Date Performance

 

Expanding Portfolio to Aid EA’s Prospects

EA has been looking to expand its gaming franchises beyond core games like Battlefield, FIFA, The Sims, Need For Speed and Madden NFL. The company has received some success with Apex Legends and Star Wars in this aspect. Addition of Codemasters’ racing game portfolio will help EA to continue its endeavor apart from expanding addressable market.

The company has been trying to make its game portfolio attractive, as evident from the recent launch of new virtual reality game Medal of Honor: Above and Beyond. EA developed the game in collaboration with Facebook’s Reality Labs’ Oculus Studios team.

EA is also set to launch It Takes Two, a co-op gender-bending gameplay, in collaboration with Hazelight Studios. The game will be available on consoles and PC from Mar 26, 2021.

Moreover, availability of new Madden NFL 21 and FIFA 21 on next-generation Xbox Series X|S and PlayStation 5 consoles worldwide is likely to boost user base and top-line growth.

Notably, for fiscal 2021, EA expects revenues of $5.625 billion and net bookings of $5.95 billion. The Zacks Consensus Estimate for fiscal 2021 revenues is pegged at $6 billion, indicating 15.1% growth from the figure reported in fiscal 2020.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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