The proposed $55 billion takeover of Electronic Arts has cleared another major hurdle, with the European Commission approving the deal under the EU Merger Regulation.
In a short statement published today, the Commission said the transaction would not raise competition concerns because of its limited impact on the markets where the companies operate. The acquisition was examined under the normal merger review procedure and approved without conditions.
However, this does not mean EA has now been bought. Yet.
The European Commission is still examining the acquisition under its Foreign Subsidies Regulation, which is designed to prevent companies from using financial support provided by non-EU governments to gain an unfair advantage. A decision in that separate review is due by July 30, although Reuters reported last week that the deal is expected to receive clearance there as well.
In other words, the sale has not crossed the finish line, but somebody is already stretching out the tape.
As I covered a few days ago, EA agreed last September to be acquired and taken private by a consortium consisting of Saudi Arabia’s Public Investment Fund, private equity company Silver Lake and Jared Kushner’s Affinity Partners.
Calling it a consortium-led acquisition is technically correct, but perhaps gives a slightly misleading impression of three roughly equal partners. Following the takeover, PIF (that’s the Saudi money) is expected to own approximately 93.4% of EA. Silver Lake will hold around 5.5%, while Affinity Partners will own the remaining 1.1%. The European Commission’s own notice describes PIF as acquiring “sole control” of EA, so calling this a Saudi takeover is hardly an outrageous simplification.
I remain unconvinced that any of this is particularly good news. The games industry has spent years placing more of its biggest publishers and developers into fewer, vastly richer hands. EA becoming part of another enormous investment empire means one fewer major company operating independently, and it will arrive carrying around $20 billion in debt used to help finance its own purchase. That does not inspire warm, fuzzy thoughts about creative freedom or job security.
There is also the unavoidable issue of Saudi Arabia itself. Human Rights Watch has accused PIF of facilitating and benefiting from human rights abuses, while describing the country’s investments in sport and entertainment as an attempt to whitewash its record. Concerns about it controlling The Sims, EA Sports FC, Battlefield and Mass Effect are therefore understandable.
Do I expect EA’s games to suddenly be forced to reflect Saudi Arabia’s deeply conservative social values? Probably not. Saudi authorities enforce harsh rules at home while state-controlled money happily pours into international entertainment that does not follow them. These investments appear designed to generate money, influence and positive attention; aggressively interfering with the products would undermine all three.
That doesn’t make the ownership harmless. It simply means the more immediate threat to EA’s studios is probably the gigantic pile of debt and the demand for returns, rather than somebody ordering BioWare to put a cardigan on every Mass Effect character.
For now, EA remains a publicly traded company and the takeover remains incomplete. But with the EU’s merger approval secured and its separate subsidy review reportedly heading towards the same outcome, this is beginning to look less like a question of whether the sale will happen and more like a question of when.
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