Electronic Arts Stock Moves Higher After The Announcement Of Glu Mobile Deal

Electronic Arts Video 09.02.21.

Electronic Arts Buys Glu Mobile For $2.1 Billion

Shares of Electronic Arts  gained upside momentum and are up by more than 2% during today’s trading session after the company announced that it would buy Glu Mobile for $2.1 billion. Glu Mobile is best-known for its mobile game Kim Kardashian: Hollywood.

Glu Mobile shareholders will receive an all-cash consideration of $12.50 per share which represents at 36% premium to Glu Mobile share price of $9.19 on February, 5.

Electronic Arts expects to finance the transaction with cash on the balance sheet, but it has already announced that it would make a bond offering which is not surprising given the current low interest rate environment.

Shares of Glu Mobile are gaining more than 33% after the announcement of the deal and have already reached the $12.50 level. The transaction will require approvals from Glu Mobile shareholders and regulators. If these approvals are obtained, the transaction will close in the second quarter of this year.

What’s Next For Electronic Arts?

Electronic Arts has recently relesed its quarterly report, beating analyst estimates on revenue and missing them on earnings. The stock was under some pressure after the release of the report as the market got accustomed to strong earnings and encouraging guidance from companies in the digital space.

The purchase of Glu Mobile will increase Electronic Arts’ presence in the mobile game market which is growing rapidly. The 36% premium for Glu Mobile looks reasonable in the age of cheap money and sky-high valuations. Analysts expected that Glu Mobile would report earnings of $0.64 per share in the next year, so Electronic Arts is buying Glu Mobile at less than 20 forward P/E which is cheap.

Not surprisingly, the market loves the deal, and Electronic Arts stock is gaining ground after the announcement of the deal. The stock has good chances to gain additional upside momentum as Glu Mobile fits well into Electronic Arts portfolio while the price of the purchase is reasonable.

For a look at all of today’s economic events, check out our economic calendar.