Electronic Arts (EA) has announced an agreement with Elevation Partners to acquire VG Holding Corporation, owner of game developers BioWare and Pandemic Studios.
"These are two of the most respected studios in the industry and I am glad to be working with them again," said EA chief executive John Riccitiello.
"They will make a strong contribution to our strategic growth initiatives on quality, online gaming and new intellectual properties. We also expect this to drive long-term value for our shareholders."
BioWare and Pandemic have 10 franchises between them under development, including six wholly owned games.
BioWare is currently developing the highly anticipated Mass Effect, to be published by Microsoft in November, and is in the early development stages of a massively multiplayer online game.
Pandemic is redefining open-world games with its upcoming Mercenaries 2: World in Flames and Saboteur, in addition to several unannounced projects.
The development teams will join the EA Games label run by Frank Gibeau, president of EA Games.
"Pandemic Studios remains focused on attracting the best talent and creating blockbuster action games," said Josh Resnick, president and co-founder of Pandemic.
"As a worldwide publishing leader, EA represents the ideal partner to bring our titles to market as global entertainment events."
The two studios have been recognised for creating some of the highest-quality games in the industry, but many commentators and gaming communities are unhappy about the acquisitions.
EA has been accused of absorbing successful independent developers primarily for their intellectual property assets, and making the developers produce mediocre games on these same franchises.
The company is set to pay up to $620m in cash to the stockholders of VG Holding and will issue up to an additional $155m in equity to certain employees of VG Holding, which will be subject to time-based or performance-based vesting criteria.
EA will also assume outstanding VG Holding stock options, and has agreed to lend VG Holding up to $35m through the closing of the acquisition.
The deal is subject to customary closing conditions, including regulatory approvals, and the transaction is expected to close in January 2008.
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