Microsoft’s victory in a court hearing over its proposed acquisition of
Activision Blizzard
is a boost for the videogame sector as a whole. Investors looking for other stocks which could become acquisition targets are turning to
Electronic Arts
and
Take-Two Interactive Software.
The potential conclusion from the
Microsoft
(ticker: MSFT) ruling is that big technology and media companies won’t be blocked from acquiring videogame developers. That’s already raising hopes of further deals.
“[Tuesday’s] developments likely have corporate development departments at major tech and media companies sharpening their pencils,” wrote analysts at Raymond James, led by Andrew Marok, in a research note. “We expect the return of M&A premiums to other major publishers, including EA and TTWO.”
EA
(EA) stock rose more than 5% on Tuesday, although it gave back some gains to fall 0.6% Wednesday to $136.45.
Take-Two
(TTWO) climbed 4.7% on Tuesday, but fell 1.4% to $148.67 on Wednesday.
Acquirers would likely be limited to some of the largest U.S. and global companies. EA—which makes major videogame series such as Madden and Battlefield—currently has a market valuation of around $35.5 billion. Take-Two, the publisher of Grand Theft Auto, is valued at $24.4 billion.
Amazon.com
(AMZN) was reported to be interested in buying EA last year, although both companies declined to comment at the time. EA stock only trades a little above where it was at that time, when analysts suggested a competitive bidding process could lift it to $188 a share.
Take-Two has arguably become a tougher buyout target since its own $12.7 billion purchase of mobile game developer Zynga last year. That’s made it a bigger company to potentially swallow and would require a buyer comfortable with a videogame portfolio including both big-name console brands and casual mobile games.
Analysts at Benchmark Research wrote in a research note that in addition to EA and Take-Two, potential acquisition candidates include
Roblox
(RBLX) and
Ubisoft
(UBI.France). Benchmark’s analysts cited
Netflix
(NFLX) and Google-parent
Alphabet
(GOOGL) as potential U.S. buyers of videogame companies alongside Amazon.
There are also international companies which are potential acquirers. Japan’s
Sony
(SONY) has been a fierce critic of the Microsoft-Activision deal and could feel forced to respond despite already buying Halo creator Bungie for $3.6 billion.
China’s
Tencent Holdings
(0700.HK) is the world’s largest videogame company by revenue and was reported by Reuters last year to be setting its sights on greater overseas expansion as the Chinese market slows.
Write to Adam Clark at [email protected]
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