History's largest buyout closes tomorrow. The last record holder went bankrupt.
EA goes private on Tuesday at $210 a share, the biggest sponsor take-private ever recorded. The previous record holder was TXU, which is not an omen, just history with a Chapter 11 in it.
Tomorrow, on or about the close of trading, Electronic Arts stops being a public company and the leveraged buyout gets a new all-time record holder. A word about the old one seems appropriate.
The record EA breaks was set in 2007, when KKR, TPG and Goldman Sachs closed their $45 billion purchase of TXU, the Texas utility. That deal was renamed Energy Future Holdings, financed overwhelmingly with debt, and filed for Chapter 11 in April 2014, seven years after closing. It held the title for nineteen years. Records in this genre come with history attached.
EA's version is different, and the differences are the story. The consortium of PIF, Silver Lake and Affinity Partners is paying $210 a share in cash, a 25% premium to the unaffected close of $168.32 and above the stock's all-time high of $179.01, for an enterprise value of roughly $55 billion. Per the September announcement, the funding is approximately $36 billion of equity, including PIF rolling over its existing 9.9% stake, against $20 billion of debt fully and solely committed by JPMorgan Chase, of which $18 billion funds at close.
Read that structure again. Almost two thirds of the funding is equity. TXU was built the other way round. By the standards of the genre, the largest leveraged buyout in history is barely a leveraged buyout: it is a sovereign wealth allocation with a debt garnish, and the debt is there mostly because $20 billion from JPMorgan costs less than $20 billion of anyone's equity.
And yet the leverage is real where it counts. Octus, the credit research house, estimated pro forma leverage at around 7.4x, with free cash flow cover compressing below two times interest. Both things are true at once: conservative by capital structure, aggressive by cash flow. EA posted GAAP net revenue of about $7.5 billion in fiscal 2025. The interest bill on $20 billion now stands in the queue ahead of "we are going to invest heavily to grow the business", which is what Silver Lake's Egon Durban promised on announcement day.
