Electronic Arts to Buy PopCap Games for Up to $1.3 Billion in Online Push

Electronic Arts Inc. (ERTS), the second- largest U.S. video-game publisher, agreed to buy PopCap Games for as much as $1.3 billion in cash and stock to extend a drive into online titles played on websites like Facebook.

Electronic Arts will pay $650 million in cash and $100 million in stock for the producer of games such as “Plants vs. Zombies” and “Bejeweled,” according to a statement today. PopCap’s owners may receive as much as $550 million more in performance-based payments.

The purchase is the biggest yet in the online area for Electronic Arts, which bought Playfish Inc. in November 2009. Chief Executive Officer John Riccitiello is seeking $1 billion in digital sales this fiscal year. Electronic Arts, based in Redwood City, California, is paying 10 times profit before interest, tax, depreciation and amortization, Eric Brown, the company’s chief financial officer, said in an interview.

PopCap, whose titles tend to be popular with women in a variety of age groups, fits into Electronic Arts’ strategy of targeting casual players with games for consoles, personal computers, smartphones and other products, Brown said.

“The key thing is they’re an additional cross-company platform,” Brown said.

Electronic Arts has been moving to compete with Zynga Inc., the biggest application developer on Facebook, for dominance of the casual game business. Zynga filed for a $1 billion initial public offering this month.

$100 Million in Sales

Closely held PopCap, based in Seattle, posted more than $100 million in revenue last year, and had 40 percent year over year growth that could accelerate as Electronic Arts expands distribution in Europe and elsewhere, Brown said.

“Zynga is about a successful business based on two games and one platform,” Brown said. “We’re buying a scale developer that’s the leader in casual games.”

The acquisition will add 10 cents per share, excluding items, to fiscal 2013 profit, Brown said.

Electronic Arts also reported preliminary revenue of $500 million to $525 million, excluding items, in the first quarter that ended last month. The company previously forecast $460 million to $500 million. Analysts projected sales of $488.1 million, the average of 18 in a Bloomberg survey.

The company also put its preliminary loss at 37 cents to 40 cents a share, excluding items, compared with the 44-cent to 49- cent loss forecast earlier.

Electronic Arts fell 83 cents to $23.34 in extended trading. The shares lost 22 cents to $24.17 in regular Nasdaq Stock Market trading and have gained 48 percent this year.

To contact the reporter on this story: Cliff Edwards in San Francisco at cedwards28@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

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