Electronic Arts has leapfrogged one of its rivals with a $1.2 billion deal for UK video game developer Codemasters.
EA (EA) said in a statement on Monday that it will pay £6.04 ($8.10) per share for the producer of racing games including Formula One and DIRT. That’s roughly 14% more than November’s cash and share offer from Take-Two Interactive Software.
Codemasters had originally agreed to be bought by Take-Two but its board has now ditched that recommendation in favor of the richer offer from EA. The EA deal is expected to close in the first quarter of next year. EA is based in California, and best known for games such as The Sims and FIFA.
CEO Andrew Wilson said that EA had admired Codemasters’ “creative talent” and games “for many years.”
“We believe there is a deeply compelling opportunity in bringing together Codemasters and EA to create amazing and innovative new racing games for fans,” he said in a statement. “Our industry is growing, the racing category is growing, and together we will be positioned to lead in a new era of racing entertainment.”
Shares in Codemasters increased by more than 20% to £6.42 ($8.61) in London, suggesting that some investors expect a counteroffer to materialize. Take-Two (TTWO) did not immediately respond to a request for comment.
Video game sales have increased during the pandemic as people spend more time at home, part of a broader trend that has benefited tech companies that offer digital services and online shopping. More people have become gamers this year, and more people started watching gamers on services like Amazon’s (AMZN) Twitch.
Surging sales and earnings have dramatically boosted investor demand for tech shares, and valuations are skyrocketing. The dynamic has been underscored by several recent deals and IPOs.
Airbnb shares went from $68 to $146 a piece in their debut last week, valuing the company at more than $100 billion. That meant Airbnb was worth more than Marriott (MAR), Hilton and Hyatt (H) combined.
That came just after shares in food delivery app DoorDash skyrocketed in their first day of trading, valuing the company at around $70 billion, or almost as much as FedEx (FDX).