lectronic Arts Inc. today announced an agreement with Elevation Partners to acquire VG Holding Corp, the owner of both BioWare and Pandemic Studios. The deal will cost EA up to $620 million cash to VG Holding's stockholders, and will issue an additional $155 million to specific VG Holding's employees, which are subject to time-based or performance-based vesting criteria, and EA will assume $50 million in outstanding VG holding stock options. EA has also agreed to lend VG Holding $35 million as the aquisition closes. While still under closing conditions and approvals, the transaction is expected to close in January.

EA plans to bring with this agreement ten franchises that are currently in development by BioWare and Pandemic Studios, which six are wholly owned games. Mass Effect will still be published by Microsoft in November, however this deal will make EA the owner of the Mass Effect franchise. Of these 10 franchises, EA expects to spread these out from now until 2011.

"These are two of the most respected studios in the industry and I'm glad to be working with them again. They'll make a strong contribution to our strategic growth initiatives on quality, online gaming and developing new intellectual properties," said John Riccitiello, EA's Chief Executive Officer. "We also expect this will drive long-term value for our shareholders."

"Pandemic Studios remains focused on attracting the best talent and creating blockbuster action games," said Josh Resnick, President and Co-founder of Pandemic Studios. "As a worldwide publishing leader, EA represents the ideal partner to bring our titles to market as global entertainment events."

"We are truly excited by John Riccitiello's new vision for EA," said Ray Muzyka, Co-founder and CEO of BioWare Corp. "This vision is consistent with BioWare's focus on crafting the highest quality story-driven games in the world. It will enable us to further the careers of the passionate, creative and hard working teams at BioWare Edmonton and BioWare Austin."

Update: Electronic Arts just held a conference call that explained more of the situation.

While many are fearing the fact that this buy-out will majorly affect both Pandemic and BioWare, Riccitiello made it clear that there will still be a distinct seperation of the companies. "Inside our label structure they will maintain their autonomy." To what effect this means is unknown. So if they're still remaining independent to a point, how will this benefit Electronic Arts? CFO Warren Jenson believes that this aquisition will generate $300 million annually, and that this would be shown fiscally in 2009 and 2010.

Riccitiello explained that one of the main reasons why Electronic Arts decided to persue the two developers is the aquistion of these two companies helps fill gaps in EA's line-up where the company isn't strong in action/adventure, RPG, and MMO markets.

The number of 10 franchises that was cited in the press release, EA Games Label President Frank Gibeau explained that this included a few titles that haven't been announced yet. One title that still has to be mentioned is BioWare's Dragon Age.

We'll have more on this as it develops.