Disney’s Epic Deal Values Fortnite Maker at $22.5 Billion, a Sharp Cut
Disney’s $1.5 billion investment in Epic Games values the Fortnite maker at $22.5 billion, a person familiar with the matter said. The price is about a 29% drop from where investors last valued the company less than two years ago.
The investment makes the “Fortnite” maker one of the largest private, venture-backed companies to sell new shares at a steep discount since higher interest rates hit tech valuations. Disney’s $1.5 billion investment will dilute existing Epic shareholders by 9%, the person said. The size of the investment would imply a roughly 7% stake in the company.
The Takeaway
• Disney’s $1.5 billion investment will dilute existing Epic shareholders by 9%
• Purchase price values firm at $22.5 billion, 29% lower than last valuation
• Epic’s other shareholders include Tencent, Sony and Lego
Disney CEO Bob Iger announced the deal on the company’s earnings call Thursday, calling it “Disney's biggest entry ever into the world of video games.” The companies didn’t disclose the valuation or size of Disney’s stake. Epic declined to comment.
The equity deal is part of a “multiyear project” for the two companies to create “an all-new open, persistent and social universe that will bring Disney stories and experiences to life, interoperating with Fortnite,” Epic said in a press release.
Epic expects its partnership with Disney to generate more revenue than the roughly $2 billion it gets from Fortnite annually, the person said.
The price Disney paid is roughly in line with where mutual funds such as Fidelity, T. Rowe Price and Blackrock have marked their stakes in Epic Games recently, according to Caplight, which tracks the secondary market for private startup stock.
Few large private tech firms with high valuations have sold new shares at significantly lower valuations over the past year and a half, with payments firm Stripe and corporate credit card startup Ramp notable exceptions.
The Disney deal is the latest step in a winding financial history for Epic, which chief executive officer Tim Sweeney started in his parents’ basement in 1991. He sold a 40% stake to Tencent in 2012, and raised $1.25 billion in 2017 from KKR, Vulcan Capital and Kleiner Perkins at a $15 billion valuation.
In 2021 and 2022, Epic raised hundreds of millions of dollars from companies such as Sony and the parent company of Lego as well as financial firms like Appaloosa Management, KKR, Baillie Gifford and GIC, in successive deals that valued the firm at $28.7 billion and $31.5 billion, respectively.