Why Disney Should Buy Electronic Arts

Date: 12-13-2008 Views:
KeyWord: Disney, EA, FIFA, Warhammer, World of Warcraft
Summary:Rick Aristotle Munarriz posted an article in the website of The Eoltey Fool to discuss why Disney should buy Electronic Arts by listing 5 reasons.

As financial crisis profoundly influenced game industry, many mergers, acquisitions or large-scale corporate restructurings have taken place and are still going on at anytime and in anywhere. Rick Aristotle Munarriz posted an article in the website of The Eoltey Fool to discuss why Disney should buy Electronic Arts by listing 5 reasons.

The details are as below:

"Is Walt Disney Co. preparing a bid for Electronic Arts?" That's what The Wall Street Journal's "Heard on the Street" column asked yesterday, building on comments that Disney (NYSE: DIS) CFO Tom Staggs made during a conference on Tuesday.

Asked if Disney's focus would be on developing in-house games over buying more developers, Staggs responded, "I don't want you to conclude that those are in the long term mutually exclusive." He went on to say that a "strategic and attractive" purchase would be "a possibility" for the family entertainment giant.

Did he say Electronic Arts (Nasdaq: ERTS)? No. However, a combination of EA's battered share price and Disney's desire to ramp up its gaming presence dovetail nicely in the rumor mill. Even if it's unlikely to happen, let me go over five reasons why it makes perfect sense.

1. Disney is no stranger to gaming shopping sprees
Even if Disney has historically gone with organic releases or licensing deals like the Cars game line through THQ (Nasdaq: THQI), acquisitions are clearly part of its DNA.  The company has already coughed up the dough for purchases like Avalanche Studios in 2005 and the fast-growing Club Penguin online community last year.

EA would be a huge purchase. It commands an enterprise value of nearly 4 billion USD and that's before we tack on a reasonable buyout premium. However, Disney has aimed even higher in the past in its Pixar and Capital Cities/ABC deals.

More details on next page.

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