Elevation has first exit in sale to EA

Video game publisher Electronic Arts Inc. (Nasdaq: ERTS) last week agreed to acquire two software studios from Elevation Partners in a deal worth $860 million. The acquisition is considered the largest ever purchase in the industry for a video game developer, topping the $680 million that EA paid for Jamdat Mobile Inc. in 2006.

The newly acquired studios, BioWare Corp. and Pandemic Studios, are owned by parent company VG Holding Corp. Elevation invested $300 million in the companies in 2005. Under the terms of the deal, EA will pay VG stockholders up to $620 million in cash and issue as much as $155 million in equity to some of the company’s employees. The sale is the first liquidity event for Elevation since it was founded in 2004.

In a filing with the Securities and Exchange Commission, EA reported that CEO John Riccitiello could personally gain as much $4.9 million from the deal, based on his continued financial interest in Elevation as one of its founding partners. Riccitiello joined EA in 1997 and rose to president and COO before departing in April 2004 to co-found Elevation with U2 singer Bono, former Apple executive Fred Anderson and private equity pro Roger McNamee. He returned to EA in April as CEO. Riccitiello recused himself from the EA board’s deliberations and vote on the proposed BioWare and Pandemic acquisition.