Disney Could Buy EA, says WSJ

Disney has already stepped up its game lately with Disney Interactive Studios, but could the entertainment giant buy EA? The Wall Street Journal thinks so...

by James Brightman on Monday, November 03, 2008

Electronic Arts is one of the big boys of the video game business. It seems like there's always some smaller developer or publisher on EA's acquisition radar, but for once, it could be EA that's the target, according to a new article in The Wall Street Journal. The article speculates that the timing would be right for Disney to swoop in and acquire EA, given the company's stock decline last week. EA's market cap has fallen quite a bit in the last few years. Several years ago EA was valued around $19 billion, but the publisher is now worth about $7.3 billion.

"Disney could afford it. At June 30, its net debt was $11 billion, roughly 1.2 times Pali Research's estimate of 2008 earnings before interest, tax, depreciation and amortization. Also, Disney's stock has massively outperformed EA's this year. At a 40% premium, EA would cost $7.7 billion excluding the cash," notes the WSJ. "Disney would be gutsy to step up during the current economic uncertainty. But it might be better than waiting for better times and paying top dollar."

The WSJ believes that EA would be a great fit for Disney. "Any entertainment company could be interested in EA given continued growth in video game sales, the potential for cross-fertilization with TV and film storylines, and advertisers' interest in buying space in games," WSJ continues. "Disney makes the most sense. EA's biggest assets include its sports games, such as Madden NFL, which would fit with Disney's ESPN cable network. Disney also could save at least part of the roughly $200 million it spends annually developing its own games."

Wedbush Morgan Securities analyst Michael Pachter doesn't see a deal like this happening, however. When asked for comment, he told GameDaily BIZ that it's "not [going to happen] in this environment" and he added that it's "not worth wasting breath about."

Thanks to MCV for the tip via GameDaily