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With gaming mergers advancing, analysts weigh best Electronic Arts matchups

Analyst chatter has kicked up a bit about potential M&A activity for videogame publisher Electronic Arts (NASDAQ:EA), spurred not only by reporting about past talks but also the industry's ongoing moves toward consolidation. Take-Two Interactive Software (TTWO) wrapped up its deal for mobile-focused publisher Zynga (ZNGA) early Monday - a move that matches up with those of its peers (Activision Blizzard's (ATVI) roll-up of King Digital, and Electronic Arts' (EA) acquisitions including Glu Mobile and Playdemic) - not to mention Activision's own deal to be acquired by Microsoft (MSFT). Meanwhile, Friday's report that Electronic Arts (EA) got into some late-stage talks to be merged with Comcast's (CMCSA) NBCUniversal (before that plan fell apart) fired up some analysts to ponder just who might make sense to buy EA. The talk about acquiring EA, "at the very least," probably "sets a floor in the stock price," says Jefferies' Andrew Uerkwitz. That might be the biggest benefit, since "while our imagination can make several deals make sense on paper, we continue to believe the probability favors no deal over a deal for the next several quarters." Potential purchases from Walt Disney (NYSE:DIS) or Apple (NASDAQ:AAPL) "make little sense to us," he says; meanwhile, "we've argued in the past Amazon (NASDAQ:AMZN) should be looking to acquire a studio, so this one seems plausible." The report about discussions to spin NBCUniversal (CMCSA) into an EA merger is interesting, but "likely much harder in reality vs. on paper." Uerkwitz has a Buy rating, and his $165 price target implies 23% further upside. EA stock is up 2.6% Monday. Talk about a big gaming-industry transaction can't be called "surprising" based on the consolidation seen so far, Raymond James says, though EA selling might be somewhat unexpected after its own purchases in the past year. Take-Two (TTWO) might make a better target, due to a higher proportion of first-party intellectual property, analyst Andrew Marok says - but buying EA can make sense for the right strategic partner. And if it were NBCUniversal, that would "take some adjusting." "In general, we believe the skill set for creating and marketing video games is separate from that of creating and licensing content. We believe the NBCU library of content has many potential crossovers into video games but that game creation itself needs a more specialized unit to appeal to gamers," he says. Disney (DIS) makes the most sense for EA, he writes: EA's "fortress" position in sports games offers natural synergies with ESPN, and EA's IP is "largely family-friendly, which may be a consideration for Disney" vs. the type of controversies seen around Take-Two's (TTWO) Grand Theft Auto. Apple (AAPL) and Amazon (AMZN) make "more tenuous fits" for EA considering some integration pains, he argues. In Amazon's favor, at least it's made internal game development efforts so far, while Apple's have been limited to its Apple Arcade product. Industrywide, videogame sales slipped year-over-year for a sixth straight month in April, to $4.337 billion.

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