Electronic Arts, a digital interactive entertainment company, has agreed to snap up Glu Mobile for a total enterprise value of $2.1 billion, including net cash of $364 million. Glu Mobile shares are up 34% in Tuesday’s pre-market trading.
Per the terms of the deal, Electronic Arts (EA) will pay $12.50 for each share of the San Francisco-based mobile games’ creator. The cash paid per share represents a 36% premium to Glu Mobile’s closing price on Feb. 5.
The combined company will have a mobile product portfolio with over 15 top live services and $1.32 billion in bookings over the last twelve months. The transaction, which awaits Glu Mobile (GLUU) shareholder approval and certain regulatory approvals, is expected to close in the second quarter of this year.
The deal is expected to be immediately accretive to Electronic Arts’ total net bookings. (See Electronic Arts stock analysis on TipRanks)
Electronic Arts CEO Andrew Wilson said, “Mobile continues to grow as the biggest gaming platform in the world, and with the addition of Glu’s games and talent, we’re doubling the size of our mobile business. With a deep IP portfolio and an expanding global audience, we’ll deliver more exciting experiences for our players and drive further growth for Electronic Arts.”
Last week, the company reported 3Q results. Electronic Arts’ 3Q earnings fell 39% to $0.72 per share on a year-over-year basis and missed Street estimates of $2.96 per share. Revenues increased 5% to $1.67 billion and came in below analysts’ expectations of $2.39 billion.
Following the deal announcement, Wedbush analyst Michael Pachter reiterated a Buy rating on the stock with a price target of $175 (23% upside potential). Pachter expects, “the transaction to be immediately accretive.”
“The merger poses considerable synergies and makes sense for both sides”, the analyst added.
Wall Street analysts are cautiously optimistic on the stock’s outlook. The Moderate Buy consensus rating breaks down into 11 Buy ratings versus 9 Hold ratings. The average analyst price target stands at $158.16 and implies upside potential of about 11% to current levels over the next 12 months. That’s after shares jumped 39% over the past year.
Electronic Arts scores a 9 of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
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