Investors, analysts reserved on EA-PopCap union

After the end of trading yesterday, Electronic Arts made a big splash with the acquisition of PopCap Games, picking up the developer of Bejeweled and Plants vs. Zombies in a deal worth between $750 million and $1.3 billion. Despite the significance of the pickup, the reaction to it from analysts and Wall Street has been mild at best.

Dividdeeeeennnds!

Electronic Entertainment Design and Research analyst Jesse Divnich told GameSpot the structure of the deal--with the payment changing depending on how much revenue PopCap brings in for EA over the coming years--helps temper concerns about EA paying too much.

"Over the last five years, most acquisitions in emerging markets go for a 10x to 20x multiple on revenues," Divnich said. "The purchase price of PopCap will eventually fall in between the 10x to 20x range, making PopCap's acquisition typical and in-line with current market standards."

In a note to investors, Wedbush analyst Michael Pachter was more positive on the deal, saying it "has the potential to be transformative."

"In our view, PopCap is a great strategic fit, and we acknowledge that there are limited acquisition opportunities for EA that have the potential to add as much to EA's top and bottom lines," Pachter said. "However, EA's acquisition history has been uneven, and investors are generally skeptical about large-scale acquisitions. We think that the deal's structure offers some protection, and note that at the low end, the deal would be merely expensive, but would not be a disaster."

As of press time, EA stock was trading at $24.15, down less than 1 percent from its pre-announcement closing price. The last time the publisher announced an acquisition of this scope--2007's $860 million deal to pick up BioWare-Pandemic--shares of the company jumped more than 4 percent to hit a 52-week high despite mixed reaction from analysts. After launching Mercenaries 2 and Saboteur, Pandemic was gutted two years later and folded into EA's Los Angeles studio.