EA buys racing sport developer Codemasters for $ 1.2 billion

An Electronic Arts (EA) video game logo was featured at the Electronic Entertainment Expo in Los Angeles last year.

Lucy Nicholson | Reuters

LONDON – Electronic Arts reached an agreement on Monday to buy Codemasters, a UK racing game developer, worth $ 1.2 billion.

The deal boosted an earlier transaction between rival publisher Take-Two Interactive and Codemasters. The firm agreed to acquire Codemasters for £ 726 million ($ 971 million) just last month.

“The Codemasters Board has examined various aspects of the EA offer and regards the EA offer as a superior offer for Codemasters’ shareholders compared to the Take-Two offer,” said the British company in a press release.

EA said Codemasters shareholders would receive £ 6.04 in cash for every Codemasters common share. The transaction is expected to close in the first quarter of 2021, EA added.

The Codemasters acquisition is the largest deal in EA history and takes place amid increasing consolidation in the video game industry as the coronavirus pandemic accelerated game demand.

In September, Microsoft announced it would buy ZeniMax Media, the company owned by Bethesda Softworks, for $ 7.5 billion. This is the largest gaming acquisition in Microsoft history.

Codemasters is best known for its Formula 1 and dirt racing game franchises. A combination with EA would bring these big titles under the same ownership as the popular racing game series Need for Speed.

EA’s shares rose about 0.8% in US pre-market trading, while Take-Two rose about 0.2%.

“EA clearly wants to position itself as the leading publisher in the racing games space,” Louise Shorthouse, senior games analyst at Ampere Analysis, told CNBC.

Shorthouse added that the deal could “bring Codemasters’ wider catalog to a wider audience,” as its games would likely be launched through EA’s subscription service EA Play, which is itself available through Microsoft’s gaming subscription platform.

Sky News reported Sunday that EA had made a bigger offer than Take-Two for Codemasters. Take-Two is behind some of the world’s most popular game franchises, including Grand Theft Auto and Red Dead.

“In some ways, EA’s move feels defensive as they are already under attack by Take Two and many of their franchises are getting second-rate to senior executives,” wrote Neil Campling, director of technology, media and telecommunications research at Mirabaud Securities Note Sunday evening.

Campling added that, given the “strategic value” of Codemaster’s intellectual property and technology, Take-Two could counter EA’s offer.

“Take-Two is considering its position on Codemasters and may make another announcement,” Take-Two said in a brief statement that responded to the news on Monday.