EA invests $825 mil in development

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Electronic Arts has inked an $825 million deal to acquire VG Holding, the parent company of developers BioWare and Pandemic Studios, moving to build out its already extensive development operations.

BioWare and Pandemic are veteran studios in the gaming space that employ about 800 people worldwide combined. BioWare is putting the finishing touches on "Mass Effect," which will be published as a first-party title by Microsoft for the Xbox 360 and is expected to be one of the top action titles of the holiday season.

Pandemic's next projects are "Mercenaries 2: World in Flames" and "Saboteur," both of which now will be published by EA.

All told, the deal will enable EA to bring as many as 10 gaming franchises to the market in the coming years as well as fill a gap in the publisher's genre lineup, which was in the action-adventure and role playing categories.

"These are two of the most respected studios in the industry, and I'm glad to be working with them again," said John Riccitiello, who returned to EA this year to become CEO. "They'll make a strong contribution to our strategic growth initiatives on quality, online gaming and developing new intellectual properties."

EA CFO Warren Jenson added: "We looked at a lot of companies and had our eye on these studios for several years. These are premier developers proven by a strong track record."

Austin and Edmonton, Alberta-based BioWare is known for such RPG franchises as "Neverwinter Nights," "Baldur's Gate" and the "Star Wars"-themed "Knights of the Old Republic." Pandemic also has done "Star Wars"-themed gamed for LucasArts including "Star Wars: Battlefront" and "Star Wars: Clone Wars" as well as such original games as "Full Spectrum Warrior."

"This is an important step for us in driving growth and profitability," Jenson said, noting that games from the studios should bring in nearly $300 million in 2009 and 2010.

In the deal, which EA said won't close until early next year, the publisher will pay up to $620 million in cash to the stockholders of VG Holding and issue an additional $155 million in equity to certain VG Holding employees that will be either time- or performance-based. Other financial considerations bring the deal's value to more than $810 million.

IDG game analyst Billy Pidgeon said the acquisition is a big move for EA, adding: "BioWare is the leading Western developer of RPGs. The real key is whether they'll be able to retain all the talent at both studios."
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