EA acquires PopCap Games for digital push

Electronic Arts has acquired PopCap Games.

EA, which announced the acquisition after the market closed today, said that the two parties agreed to a price of $650 million in cash and $100 million in stock. In addition, PopCap is eligible to receive up to $550 million in earnouts over the next couple years if the company can hit certain revenue milestones.

PopCap shareholders will receive nothing in earnouts if the company generates $91 million or less in earnings before interest and taxes (EBIT) through December 2013. The company's shareholders can stand to make $550 million in earnouts if PopCap's EBIT hits $343 million or more over that period.

PopCap Games was founded in 2000 and currently has 400 employees. It is headquartered in Seattle and has offices in Canada, Europe, and Asia. The company offers games both as downloads and in retail stores, along with social games on Facebook, smartphones, and game consoles. Plants vs. Zombies, Bejeweled, and Zuma are among the company's most popular titles. According to EA, 80 percent of PopCap's revenue comes from digital platforms, with the remaining 20 percent coming from retail sales.

Along with PopCap's main studio, the company in April launched 4th & Battery, a studio focused on developing simpler games for mobile devices. PopCap executive vice president Ed Allard described it as a proving ground of sorts for the company's designers and developers to "hone their chops." So far the effort has yielded two games, Candy Train and Unpleasant Horse, both of which are available on Apple's iOS platform.

Over the years, PopCap has been courted by several potential suitors.

In 2002, for instance, Microsoft was in talks to buy the then-fledgling gaming company for $5 million, but a deal never materialized. In an interview with Develop last year, PopCap creative director Jason Kapalka told the outlet that the company was receiving investment offers on a monthly basis.

Late last month, TechCrunch cited multiple sources who said that PopCap was in the process of being acquired for more than $1 billion. TechCrunch's sources didn't know who the buyer was, but there had been some speculation that EA was closing in on the acquisition.

EA's decision to buy PopCap falls in line with what the company has been saying all along about its future. In May, EA CEO John Riccitiello said that he plans to transform the game publisher "from a packaged goods company to a fully integrated digital entertainment company."

EA doubled down on its push to enter other gaming realms in 2009 when it acquired social-gaming company Playfish for $275 million in cash and $25 million in stock. Like the PopCap acquisition, EA offered Playfish earnouts if it met certain performance milestones.

With Playfish's help, as well as other efforts, such as offering downloadable extras and titles on mobile platforms, EA's digital game business has grown substantially. EA said in May that its digital revenue had grown by 46 percent year over year to more than $800 million in its last fiscal year. The company said that its digital revenue could "exceed $1 billion" during this fiscal year.

In June, EA launched Origin, a direct-to-consumer game-delivery platform, in the hopes of growing that digital revenue even more. The company made 150 games available at launch that users could purchase and download to their PCs. EA said at the time that Origin would be a go-to spot for mobile games, as well.

EA's PopCap acquisition is scheduled to close in August, pending regulatory approval. As of this writing, EA shares are down 3.52 percent to $23.32 in after-hours trading.

Update throughout the afternoon to include more details.

CNET Staff Writer Josh Lowensohn contributed to this report