EA’s stock price rises 5 percent on buyout rumor

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Battlefield 3

Giant video game publisher Electronic Arts saw its stock price rise 5.5 percent today after the New York Post reported a rumor that private equity firms are considering a buyout.

The Post reported that makers of such games as SimCity, Mass Effect 3, and Battlefield 3 is in early discussions about a possible buyout with private equity giants KKR and Providence Equity Partners. KKR, headed by Henry Kravits, declined comment, as did Providence, in comments to the New York Post. EA also said it does not comment on rumors.

A source told the Post that EA’s management made it known that they would “do a deal at $20 a share.” EA’s stock closed today at $13.81 a share, up 72 cents. Its market value is $4.4 billion, well below the $7 billion it traded at for much of last year.

EA’s stock has fallen in part because the company’s flagship online game, Star Wars: The Old Republic, hasn’t performed as well as expected after six years in development.

EA’s largest rival, Activision Blizzard, was also reportedly up for sale as majority owner Vivendi wanted to sell its 61 percent stake for around $8 billion. No deal materialized. EA is a 30-year-old company that is adapting as fast as it can to the digital age. About a quarter of its revenues, or $1.3 billion in 12-months trailing revenue, now come from digital sources.

Rival Zynga has also seen its stock price plummet from $10 a share last fall to $3 a share today, knocking its value down to $2.28 billion. But rumors of a takeover haven’t hit Zynga, in part because founder Mark Pincus holds a majority of the voting shares of the company and so it can’t easily be taken over against his wishes.