Electronic Arts Inc. (NASDAQ:EA) rallied by more than 3% after it confirmed plans to expand its footprint into the mobile video game space. The video game giant has inked a $2.1 billion deal to acquire GluMobile Inc. (NASDAQ:GLUU) as the gaming industry’s consolidation gathers pace.
GluMobile Acquisition
Under the terms of the deal, GluMobile shareholders are to receive $12.50 a share, representing a 33% premium to the stock’s closing price on Monday. Regulators stopped GluMobile Shares from trading in after-hours after they jumped towards the offer price.
According to EA CEO Andrew Wilson, the acquisition is poised to combine amazing teams and deeply engaging products crucial to creating a mobile games leader with proven expertise. Mobile remains the fastest-growing segment in the video game business.
While the acquisition is still the subject of shareholders’ approval, it is highly unlikely that shareholders will shoot down the deal. The only thing standing in the way of the $2.5 billion deal is regulatory approval at a time when regulators have been ramping up crackdowns on deals that have the potential to affect competition in various segments.
Mobile Gaming Ambitions
The acquisition is a major coup for Electronics Arts as it has made name for itself as an active developer for mobile games. Some of the most potent titles under the GluMobile pipeline include Kim Kardashian: Hollywood, MLB Tap Sports Baseball, and Aliens Unleashed. The games are already available on all the big mobile platforms, including iOS and Android.
With GluMobile in the fold, Electronics Art is poised to have the largest gaming platform expected to double its efforts in the segment. However, it is still unclear how the acquisition is poised to impact its fundamentals.
GluMobile comes into the deal having reported impressive financial results. In the most recent quarter, revenue rose by 25% to highs of $141 million. Bookings, on the other hand, were up 15%. Net income more than doubled to $23.9 million from $10.8 million a year ago same quarter.
