Investors Not Impressed with EA's (ERTS) Purchase of PopCap Games
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Electronic Arts (Nasdaq: ERTS) shares are down more than 3 percent in after-hours trade Tuesday following news the company has signed an agreement to buy PopCap Games.
PopCap is a maker of casual digital games including Bejeweled, Plants vs. Zombies and Zuma.
According to terms of the deal, EA will pay PopCap $650 million in cash and $100 million in Electronic Arts common shares. Additionally, EA will provide additional variable cash consideration, contingent upon the achievement of certain non-GAAP EBIT milestones through December 2013. The additional payment milestones range as follows: if the two-year cumulative EBIT totals $91 million or less, PopCap sellers will not receive further compensation (at the low end of the range); if EBIT hits $343 million or more, sellers will receive $550 million in further consideration (at the high end).
With the release, Electronic Arts also offered some preliminary results and updated guidance:
PopCap is a maker of casual digital games including Bejeweled, Plants vs. Zombies and Zuma.
According to terms of the deal, EA will pay PopCap $650 million in cash and $100 million in Electronic Arts common shares. Additionally, EA will provide additional variable cash consideration, contingent upon the achievement of certain non-GAAP EBIT milestones through December 2013. The additional payment milestones range as follows: if the two-year cumulative EBIT totals $91 million or less, PopCap sellers will not receive further compensation (at the low end of the range); if EBIT hits $343 million or more, sellers will receive $550 million in further consideration (at the high end).
With the release, Electronic Arts also offered some preliminary results and updated guidance:
- Q1 sales now expected to be $500 to $525 million, up from prior guidance of $460 to $500 million, and compared to the analyst consensus of $490.14 million
- Q1 adj-loss moves from 44 to 49 cents per share to 37 to 40 cents, vs. the Street estimate of a 45 cents loss
- sees Q2 non-GAAP loss of 5 to 15 cents per share, vs. the consensus of an 11 cent gain
- reaffirmed its FY12 adj-EPS guidance of 70 to 90 cents
- raised its FY12 sales guidance from $3.75 to $3.95 billion to $3.800 to $4.025 billion, which compares to the Street estimate of $3.9 billion
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