Why Merger Talks Between Electronic Arts And NBCUniversal Failed: Who's A Potential Buyer?

Zinger Key Points
  • An analyst is bullish on EA's ability to maintain a sizable market share in the large and growing global video game market.
  • Companies like Alphabet and Sony may be waiting for the outcome of the Microsoft/Activision deal, before bidding for EA.

Electronic Arts Inc. EA shares traded higher by 1.5% on a down day in the market on Tuesday following unconfirmed media reports that EA has been aggressively pursuing a sale of the company.

What Happened? On Friday, news outlet Puck reported that Comcast Corporation CMCSA CEO Brian Roberts approached EA CEO Andrew Wilson with a proposal to merge Comcast's NBCUniversal subsidiary with EA. The deal reportedly fell apart over a disagreement on price, but Comcast was reportedly not the first company to hold discussions with EA on a buyout.

EA also reportedly held unconfirmed talks with Walt Disney Co DIS, Amazon.com, Inc. AMZN and Apple, Inc. AAPL.

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The idea of EA merging with a major media or tech company seems even more realistic following the planned $68.7 billion buyout of Activision Blizzard, Inc. ATVI by Microsoft Corporation MSFT announced in January.

Why It's Important: On Tuesday, Bank of America analyst Omar Dessouky said the EA "Platform Put" should help support its valuation as the company continues to pursue a deal.

In fact, Dessouky said the "Platform Put" suggests there is limited downside for EA shares from current levels. When it comes to a potential acquirer for the company, he says there are certain candidates at the top of the list.

"We think a cash-rich tech company with a dominant computing footprint is a more likely acquirer (at a valuation acceptable to both parties) than a traditional media company because MSFT’s growing stable of IP could have competitive implications for Amazon, Google and Sony," Dessouky said.

In the meantime, he said he remains bullish on EA's ability to maintain a sizable market share in the large and growing global video game market.

Benzinga's Take: If a big tech company like Alphabet, Inc. GOOG GOOGL or Sony Group Corp SONY does pull the trigger on EA at some point, they may choose to sit back and first wait to see if Microsoft runs into any regulatory roadblocks with its deal for Activision.

Activision shares are currently trading at $76.86, a significant discount to Microsoft's proposed $95 buyout price, suggesting the market sees significant risks the deal will not be completed as announced.

Posted In: Andrew WilsonBank of AmericaBrian RobertsOmar DessoukyAnalyst ColorM&ANewsRumorsAnalyst Ratings