Publishing powerhouse Electronic Arts could suffer mass layoffs following the acquisition of the company by a consortium that includes Saudi Arabia’s Private Investment Fund (PIF), Silver Lake, and Affinity Partners.
As previously reported, the $55 billion deal has now been completed with the PIF taking the lion’s share of EA with a 93.4% share. The deal is a leveraged buyout — the largest ever in the industry — which means a large chunk of the cost is covered by borrowed money, and the assets and future cash flow of the target company used as security to pay it back.
Jason Schreier of Bloomberg has stated in a post on BlueSky that EA’s debt totals around $18 billion, with a yearly interest payment of $1.8 billion. Furthermore, the company’s earnings before interest, taxes, depreciation and amortisation (EBITDA) clocks in at $1.5 billion, which means it’s just about able to afford the interest payments. However, mass layoffs are expected in an effort to reduce EA’s annual costs.
EA’s annual EBITDA is around $1.5 billion, which should be enough to service the interest payments. But the publisher has told debt investors that it will cut $700 million in annual costs including $170 million in ‘organizational efficiencies’, per Bloomberg. In other words – mass layoffs.
Back in March this year, EA announced that it had laid off an unspecified number of staff across its Battlefield studios, which affected employees at Criterion, DICE, Ripple Effect, and Motive Studios.
[Source – Jason Schreier on BlueSky via VGC]