EA Acquires BioWare and Pandemic

In a surprise move, Electronic Arts announced today that it would be acquiring both BioWare Corp. and Pandemic Studios. This deal was reached with Elevation Partners to buy out VG Holding Corp., which owns both development studios. EA will pay up to $620 million in cash and will issue up to an additional $155 million in equity to certain VG Holding employees, while also assuming all outstanding VG Holding stock options and lending VG Holding up to $35 million through the closing of the acquisition.

"These are two of the most respected studios in the industry and I'm glad to be working with them again. They'll make a strong contribution to our strategic growth initiatives on quality, online gaming and developing new intellectual properties," said John Riccitiello, EA's CEO. "We also expect this will drive long-term value for our shareholders."

BioWare is currently developing an MMOG and is getting set to release the anticipated Xbox 360 title Mass Effect. Pandemic is, among other projects, working on Mercenaries 2: World in Flames and Saboteur. Together, BioWare and Pandemic have ten franchises under development, including six wholly owned games.

"Pandemic Studios remains focused on attracting the best talent and creating blockbuster action games," said Josh Resnick, President and Co-founder of Pandemic Studios. "As a worldwide publishing leader, EA represents the ideal partner to bring our titles to market as global entertainment events."

Pandemic Studios is led by Andrew Goldman, Josh Resnick and Greg Borrud. BioWare is jointly run by Greg Zeschuk and Ray Muzyka. The two companies employ approximately 800 people across studios in Edmonton, Los Angeles, Austin and Brisbane. These teams will join the EA Games Label run by its President, Frank Gibeau.

"We are truly excited by John Riccitiello's new vision for EA," said Ray Muzyka, Co-founder and CEO of BioWare Corp. "This vision is consistent with BioWare's focus on crafting the highest quality story-driven games in the world. It will enable us to further the careers of the passionate, creative and hard working teams at BioWare Edmonton and BioWare Austin."

EA said the acquisition, which is expected to be completed by January 2008, is still "subject to customary closing conditions, including regulatory approvals."

[UPDATE] Following the announcement, execs from the respective companies held a conference call, and EA confirmed that of the ten franchises, Jade Empire, Mass Effect, Mercenaries, Saboteur, and Neverwinter Nights were definitely included in the deal. And while Microsoft is publishing Mass Effect exclusively on Xbox 360 this holiday, the future of Mass Effect lies in EA's hands; as such it wouldn't be surprising to see the highly anticipated franchise end up on PS3 or other platforms as well. EA also noted that the highly touted dialog engine created for Mass Effect could be put to use in other titles. GameDaily BIZ contacted Microsoft for comment on Mass Effect but the company declined to comment.

Another interesting point from a business standpoint is that Riccitiello, the former head of Elevation Partners prior to rejoining EA, admitted that he had a residual interest in the company. Because of this conflict of interest EA deliberately had an independent board supervise the takeover of BioWare/Pandemic. EA also said that they expect to break even on the investment by 2009 and they expect to start making money on the deal by 2010.

The games from BioWare/Pandemic will likely be spread out over several years through 2011, EA said. In addition, both BioWare and Pandemic have a number of games planned for Nintendo's Wii and DS.

[UPDATE 2] Although Microsoft did not have any comment for us initially regarding Mass Effect, the company has now issued GameDaily BIZ the following statement.

"Microsoft has not yet announced specifics regarding sequels to Mass Effect but we'll be talking to EA and BioWare in the weeks to come. Mass Effect is the most anticipated role-playing game of the season, on any platform, and we are committed to the franchise's long term success."

"BioWare owns the Mass Effect IP."

"Regarding Mass Effect appearing on other platforms, Microsoft has not yet announced specifics, but we'll be talking to EA and BioWare in the weeks to come."

Interesting... could Microsoft be working on an exclusivity deal? Time will tell.