EA the Most Likely Suitor for Warner Bros. Games: Analyst
AT&T is considering the sale of its Warner Bros. gaming division, according to CNBC. The report indicates interest from major video game companies Activision-Blizzard, Electronic Arts, and Take-Two Interactive. Jefferies analyst Alex Giaimo says in a recent note that “ATVI and EA are the most logical buyers, each with enough cash to absorb the reported $4B asking price.”
About WB Games: WB Games’ portfolio of games includes both console/PC and mobile titles. The company develops games such as Mortal Kombat, Harry Potter, Lego, and Game of Thrones. This year, WB Games is launching Lego Star Wars: The Skywalker Saga, for its mobile collection.
The Suitors:
Electronic Arts: A deal might make the most sense for EA because of the company’s “immense experience licensing others’ IP and a proven ability to create strong content across many genres,” according to Giaimo. With nearly $6 billion in gross cash, EA has the financial firepower to make the purchase. Giamo notes the acquisition would help broaden its catalog and revive its mobile business.
Activision-Blizzard: While Activision’s $6 billion cash pile puts the Call of Duty maker in a position to pull off a big deal, WB Games doesn’t fit the mold of ATVI’s strategy. Giaimo points out that ATVI prefers to own their IP, and the licensing aspect of a potential deal could deter the company from pursuing WB Games. On the other hand, Jefferies says ATVI could benefit from the addition of Mortal Kombat to its portfolio, and WB IP would strengthen its mobile gaming focus.
Take-Two Interactive: With $2 billion in cash, the NBA 2K maker is the least likely of the Big 3 to pony up $4 billion for WB Games, according to Giaimo. Take-Two already has its hands full with a pipeline of 93 titles on track for release through fiscal year 2025.
Don’t forget about Big Tech: Tech companies looking to build on their current gaming ecosystem could turn to M&A to accelerate their ambitions. Jefferies analyst Ken Rumph questions whether “existing platform holders (Microsoft, Sony) or would-be entrants (Apple, Amazon, Google/Stadia) would see this as a unique chance for scale and speed.”
M&A resurgence in gaming: The report of AT&T’s desire to sell WB Games follows the $1.8 billion deal by Zynga to purchase Peak Games. A deal involving EA, TTWO, or ATVI would represent the first sizable acquisition by any of the Big 3 since 2017, when Respawn was bought by EA for $455 million and Social Point was acquired by TTWO for $280 million. ATVI acquired King in 2016 for $4.8 billion.
