Sony acquired 1.4% of Epic Games. The deal cost $250 million

On Thursday, Sony became a minority owner of Epic Games. A Japanese company bought 1.4% of the Unreal Engine developer for a quarter of a billion dollars. Based on the deal, the market value of the entire Epic Games is now an astronomical $17.86 billion.

Unreal Engine 5About the deal with Sony

VentureBeat was the first to highlight the deal. His journalists noted the following:

• Epic Games will still be able to publish games on other platforms;
• the developer does not say why he attracted funds from Sony and how he plans to spend them;
• It is unknown whether Sony receives any bonuses from Epic Games as part of the deal, which can be used in competition with Mictosoft in the console market.

In the official press release, both companies explain the “strategic investment” as follows:

“The deal cements the already established close partnership between the companies and strengthens the common mission to improve technology, entertainment and socially connected online services. The deal allows Sony and Epic to expand their collaboration to encompass both Sony’s outstanding technology and entertainment portfolio, as well as Epic’s social entertainment platform and digital ecosystem to create a unique experience for users and creators.”

What exactly is meant is not specified. The founder and CEO of Epic Games, Tim Sweeney, in the same press release, no less vaguely notes that “together we will make every effort to create an even more open and accessible digital ecosystem.”

What preceded the deal with Sony

The current funding round took place against the backdrop of two important stories for Epic Games.

Firstly, the joint presentation with Sony of the new version of the engine — Unreal Engine 5 on PlayStation 5 this May. As Sweeney admitted on Twitter yesterday, serious talks about selling a minority stake went with Sony only after the public announcement of the engine. “It looks like they (Sony) liked the Unreal Engine 5 demo,” Tim joked.

Secondly, against the background of lengthy negotiations with a number of investment firms (T. Rowe Price Group, Baillie Gifford, Kohlberg Kravis Roberts and others) about the possibility of selling a minority stake of the company in the amount of $750 million. The negotiations were repeatedly reported by Bloomberg.

The story of the partnership with Sony looks clear. But now it is unclear what will happen with the negotiations “for $750 million”? Before the deal with Sony, it was about the valuation of Epic Games at $17 billion, not nearly $18 billion.

About previous transactions

This round was the fourth fundraising for Epic Games. In total, she raised $1.58 billion in three previous campaigns.:

• one of the most important deals took place in 2012 — then Tencent acquired 40% of the developer for $330 million (now this share is worth $7.1 billion);
• Epic Games then raised funds as part of the Disney Accelerator program;
• the largest fundraising occurred in October 2018, when, at an estimate of $14.5 billion, she “raised” $1.25 from investment funds.

About Epic Games Earnings

One of the most pressing questions is why Epic Games attracts third—party funding at all. The company is now earning very serious sums without him.

According to VentureBeat sources, Epic Games earned $4.2 billion last year. Of these, EBITDA is $730 million. The company expects 2020 to be more successful — $5 billion in revenue and $1 billion in EBITDA. In April alone, the developer received $400 million in revenue.

But this year may still not be the most successful for the company. To do this, he will need to “overtake” 2018, when Epic Games earned $ 5.6 billion. Then its EBITDA was a fantastic $2.2 billion.

Also on the topic:

• Epic Games is going to raise $750 million from the estimated value of the entire company at $17 billionUnreal Engine 5 Announced
• Is there any news?