SAN FRANCISCO (MarketWatch) — Electronic Arts Inc. said late Thursday it has agreed to pay $680 million in cash for Jamdat Mobile Inc., the top publisher of video games for wireless devices, in a deal that expands its presence in a fast-growing games market.
the world’s largest creator of video-game titles, will pay $27 for each share of Jamdat
an 18% premium over its price before the deal was announced.
Jamdat, based in Los Angeles, makes popular games like “Tetris,” “Downtown Texas Hold ‘Em,” and “Bejeweled.” EA of Redwood City, Calif., dominates the market for sports-themed games like “Madden NFL” and “Need for Speed,” as well as casual games like “Harvest Mania,” and “Squelchies.”
In after-hours trading following the announcement, Jamdat’s stock soared more than 18% to $27. EA shares fell $1.51 to $54.24 during the late session.
Warren Jensen, chief financial officer at EA, said in a conference call that the deal should better position EA to capitalize on the 1.5 billion wireless subscribers market worldwide. Nearly 40% of mobile phones are currently games-enabled, said Jensen, who notes that analysts estimate the current global wireless games market at $1 billion, with growth projections calling for $5 billion in sales in the next several years.
“Most in the world today cannot afford a $300 console, but many have a cell phone and can afford a game,” said Jensen.
Within one year following the completion of their deal, EA and Jamdat say they plan to publish more than 50 games for mobile. Before getting serious about wireless, EA started the year with two games. See related story.
The deal will spell the end Jamdat’s provision of the Activision-owned “Tony Hawk” franchise. In the conference call, however, EA chief executive Larry Probst said that the majority of Jamdat’s licenses will transition to EA and become part of the combined portfolio.
EA entered the mobile games market earlier this year, facing an uphill battle for market share among Jamdat, Gameloft
and privately-held companies Mforma Inc. and Glu Mobile Inc. Activision
Walt Disney Co.
and Yahoo Inc.
are also active in mobile games.
According to wireless market research firm M:Metrics, Jamdat game titles were promoted the most among U.S. wireless carriers, ahead of Mforma and Gameloft.
In early November, Jamdat said its third-quarter revenue more than doubled behind successful European launches of its top games. Last year’s profit totaled $1.4 million, or 6 cents a share, compared to a profit of $8,000, breaking even in earnings per share.
During the quarter, Jamdat secured worldwide rights to “Tetris,” which it had acquired in its April buyout of Blue Lava Wireless in a deal valued at $137 million. See full story.
In November EA said that its fiscal second-quarter “wireless handsets” revenue was $2 million. In the previous quarter, the first quarter in which EA broke out this number, revenue was $1 million. See full story.
The acquisition is expected to close in EA’s fiscal fourth quarter, which ends in March 2006. EA said it would incur related charges of 10 cents to 15 cents a share in that quarter.
Jamdat has about 350 employees, including additional offices in Honolulu, Montreal, Tokyo, London and Bucharest, Romania.
In September, the EA wireless division had about 40 employees, according to John Batter, vice president and general manager of the unit.
Mitch Lasky, chief executive of Jamdat, is expected to lead Electronic Arts’ mobile games division after the acquisition closes.
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