EA buying PopCap Games for up to $1.3 billion (Updated)

[Updated at 3 p.m.] The rumors were true: Seattle-based PopCap Games, maker of games such as Bejeweled, Plants vs. Zombies and Peggle, has reached a deal to be acquired by Electronic Arts for between $750 million $1.3 billion, with the price depending on how well the PopCap business performs financially over the next two years.

Dave Roberts, the PopCap CEO, says in the news release announcing the deal that the Seattle company “picked EA because they have recast their culture around making great digital games.” He adds that working with EA will allow PopCap to “scale our games and services to deliver more social, mobile, casual fun to an even bigger, global audience.”

The deal consists of $650 million in cash and $100 million in EA stock up front, with the possibility of up to $550 million in additional cash if PopCap’s operations produce $343 million or more in cumulative operating profits over the next two years.

No word yet on the impact on PopCap’s Seattle-area operations, but we have messages in to company representatives to find out more, and a conference call about the acquisition is coming up shortly.

John Vechey, Brian Fiete and Jason Kapalka founded PopCap Games in 2000, and the company raised $22.5 million in 2009 from Meritech Capital and others. PopCap employs 475 people between offices in Seattle, San Francisco, Vancouver, B.C., Dublin, Seoul, Shanghai and Tokyo.

Related Post: PopCap's zombie greeting to EA

Update, 2:40 p.m.: On a conference call discussing the deal, PopCap’s Roberts described the acquisition as a “very competitive process,” saying PopCap was flattered by the level of interest — suggesting that there were multiple companies bidding or at least interested.

“The last 11 years have been an incredible journey for us at PopCap Games,” he said, citing its ability to create “enduring game franchises” and describing the response from fans to its hit games as humbling.

EA CEO John Riccitiello cited PopCap’s “proven ability to create hits” and its expansion into mobile and social gaming, including iPhone and Facebook versions of its games. He described the deal as part of the video-game giant’s push into digital distribution, aiming to create a $1 billion digital business.

PopCap generated more than $100 million in revenue last year and is on pace to increase revenue 30 percent this year, according to the companies.

Update, 2:55 p.m.: Riccitiello also talked on the call about the potential for EA to make PopCap more efficient in areas that aren’t core to game development, such as language localization and adaptation of games for individual mobile carriers and handsets.

PopCap CEO Dave Roberts

“It’s a lot of work,” he said. “It’s not the work that bothers me, it’s very unproductive work for great designers. We have swarm teams in places like Romania and India that do that work for EA’s creative organizations so that creators can create. There are a number of examples of big revenue opportunities inside of PopCap that they don’t realize anywhere near as quickly as they could because they’re servicing an existing need to push code for the next 25 handsets for Android, and EA picking that up in low-cost locations frees them to realize that opportunity.”

Update, 3 p.m.: A PopCap spokesman says the company will operate as a unit of EA after the announcement, and remain based in Seattle, and there are no plans for layoffs.

Also see this post by Develop putting the deal in the context of EA’s past acquisitions. In short, at $750 million up front, it’s significantly more than EA paid for social game development company Playfish two years ago, and not far off the $860 million EA paid for BioWare and Pandemic.

Follow-up: Q&A: PopCap co-founder on the EA deal, and the future

  • Victor

    Well done!

  • Pete

    Great news!  We work in their building, yet we heard no loud screams of excitement.

  • Guest

    Congratulations to PopCap on a successful exit! This is great news for EA shareholders and for PopCap investors.