Video gaming publisher Electronic Arts’ (NASDAQ:EA) stocks gained 6% Thursday amid the rumors that Nexon, a South Korean developer and publisher of free-to-play games currently headquartered in Tokyo has offered to buy out EA. While both the companies have refrained from any official statements on the rumor, here we try to look at why Nexus might be interested in acquiring Electronic Arts. EA competes with other game developers like Activision Blizzard (NASDAQ:ATVI), Take-Two Interactive Software (NASDAQ:TTWO) and casual gaming mainstays such as Zynga(NASDAQ:ZNGA)
Why Nexon might be interested in EA
Before analyzing the interest of Nexon in EA, it’s important to understand the nature of businesses of these gaming companies. Though not well known in US, Nexon is a pioneer of free to play MMO games in Asia. Among all ofits games, the company is most well known for Maple Story, a very successful free to play MMO in Asia.
In a highly publicized event last year, Nexon had managed to raise $1.2 billion in its IPO on the Japanese stock market. The company is aiming to grow aggressively in the near term and was recently in the news for its statement that it’s looking to buy some smartphone and mobile-game developers.
On the other hand EA has also been gradually cementing its business in social gaming genre. While the company’s Sims Social is already a highly popular game, EA acquired social MMO developer KlickNation in December 2011, to strengthen its hold in social gaming. See: EA Acquires KlickNation To Strengthen Hold in Social Games
One of the reasons why Nexon might be interested in EA can be the reach of the latter in North American social gaming market. Additionally, Nexon which till now is only limited to MMO gaming, can also diversify into other gaming genres with the help of EA. Not to forget the EA’s growing prowess in MMO space with the recently released Star Wars: The Old Republic (SWTOR) and Mass Effect 3, which may also be alluring the South Korean developer.
Trefis EA price estimate stands at $20.62, which is roughly 30% above its current market price.