The largest leveraged buyout in history?

Robert Armstrong (0:06)

Pushkin. This week, we have seen what may be the largest leveraged buyout in history. The video games maker Electronic Arts has been purchased for 55 billion American dollars. Today on the show, is this deal a sign of the top or a new dawn for Wall Street?

This is Unhedged, the Markets and Finance podcast from the Financial Times in Pushkin. I am Rob Armstrong coming to you from an autumnal New York City, joined by the two greatest reporters in the history of finance. It's a show of superlatives. James Fontanella-Khan is our US finance editor here at the FT. Welcome, James.

James Fontanella-Khan (1:01)

Thanks for having me, Rob.

Robert Armstrong (1:02)

Oliver Badnews Barnes is our US deal correspondent.

Oliver Barnes (1:07)

US deals. There's more than one.

Robert Armstrong (1:09)

Deals.

Oliver Barnes (1:09)

And it's not all bad news.

Robert Armstrong (1:10)

It's all just...

Oliver Barnes (1:11)

It's not all bad news. It's good news for the EHL.

Robert Armstrong (1:14)

Right on. Okay, Oliver, on that very point, walk us through the structure of this ginagorous deal.

Oliver Barnes (1:20)

Yes. So on Monday morning, a consortium made up of PIF, Saudi Arabian Sovereign Wealth Fund, Silver Lake, the technology-focused private equity group, and a guy you might have heard of, Jared Kushner, President Trump's son-in-law, wrote a $55 billion check to buy Electronic Arts, to take it off the public markets.

Robert Armstrong (1:43)

That's what leverage buyout means.

Oliver Barnes (1:45)

Helped by JP Morgan and Jamie Dimon, who stumped up $20 billion worth of debt.

Robert Armstrong (1:51)

Yes. Take us through the players. What is the significance of this cast of characters?

James Fontanella-Khan (1:56)

Let's start from Jared Kushner, the son-in-law of President Trump, the son-in-law to Ivanka Trump, and-

Robert Armstrong (2:03)

And he's kind of the sherpa. He's getting all the parties together and-

James Fontanella-Khan (2:07)

We wrote a beautiful TikTok explaining how the deal got put together, and essentially, it started about early in the year. Jared Kushner, who is not doing this out of his own pocket, he set up, after the Trump 1 administration ended, set up an investment vehicle called Affinity, which had a mandate to invest in fast-growing tech-focused companies.

Robert Armstrong (2:32)

He got the funding for that venture from?

James Fontanella-Khan (2:35)

Saudi Arabia.

Robert Armstrong (2:36)

Saudi Arabia, okay.

James Fontanella-Khan (2:37)

We'll get back. This is a complicated deal as a lot of buyouts are, so we're going to take our time to explain this clearly.

Robert Armstrong (2:43)

So you have Kushner, as it were, shepherding the thing through.

James Fontanella-Khan (2:46)

He met with one of the co-heads of Silver Lake, who's Egan Durbin. Silver Lake had been looking at EA for a long time. They also have a reputation for being some of the smartest guys when it comes to gigantic.

Robert Armstrong (3:02)

Complex buyouts especially.

James Fontanella-Khan (3:04)

Absolutely.

Robert Armstrong (3:05)

Is the specialty of that.

James Fontanella-Khan (3:05)

They are the best known financial engineers. Definitely on the West Coast, they've partnered with Michael Dell, all the great PCs maker. And so they are known for being the best in class to get anything of this kind of size done. So Kushner, who's not a tech guy, he's obviously made most of his money in the real estate business, predominantly in New York and Jersey, went to meet Egan. He said, what do you think about this deal? And Egan said, I'm interested. And obviously, the other key component, PIF, the sovereign wealth fund of Saudi Arabia, was already an investor in EA. They had a 10% stake. So at that point, Kushner, who had the relation with Saudi, which is kind of one of the main contributors to his private equity fund, he went and knocked on the door of the Saudis and said, hey, MBS, my dear friend, how about we do a deal and we buy out this company and kind of transform it, make more money together, help you diversify your country away from oil and gas, which is one of the big things that Saudi Arabia's crown prince MBS has been trying to do. So again, a lot of people involved.

Robert Armstrong (4:27)

But they managed to get the interests aligned. One thing I was struck by, Oliver, is, you know, with every leverage buyout, there's a discussion of the split in the deal between debt and equity.

How much debt money is being put in to the $55 billion? How much equity money? And there was a lot of equity money in this deal. It seemed high to me. I was struck by how high it is.

Oliver Barnes (4:50)