The London-listed studio behind Fortnite, Call of Duty, and Harry Potter has agreed to be acquired for £2.1 billion.
EQT is a Swedish private equity company that has acquired the Dublin-based Keyword Studios. The deal is funded by a consortium that includes Temasek Singapore, the state-backed fund of Singapore, and CPP Investments Canada, a Canadian Pension Fund.
The £24.50 per share offer represents a premium of 67 percent over the developer’s previous pre-offer price. The offer is priced at almost 16 times the adjusted earnings of £139m for 2023.
The price of the deal, which has been much discussed, is lower than originally proposed £25.50 per share. This reflects delays and cancellations in some projects by the games company and its recent trading update where it stated that there was a “softer demand” in their services.
Deutsche Numis & Robey warshaw advised Keywords. The company stated that it thought the deal was a “good opportunity for shareholders” to get a return on their cash investment upfront, at a premium over the unchanged share price.
Before it can be finalised the agreement must pass shareholder votes and competition filings, but they are not expected be significant.
Bertrand Bodson (49), the 49-year-old chief executive officer of Keywords Studios said: “This offers from EQT marks a new chapter in our growth journey. With a partner who shares our passion for growth and possesses sector expertise, we will be able to accelerate our pace of growth both organically and via M&A to unlock the numerous opportunities that lie ahead across the entertainment industry.
Since May, when EQT disclosed its interest in the company, shares of the company have nearly doubled in value. The stock market has valued it at around £1.9 billion.
In 1998, Giorgio Guastalla and Teresa Luppino founded Keywords Studios to develop business software. Later, it entered the video game industry. In 2013, it was listed in London with a value of £50million.
Keywords is one of the few games companies listed on the UK stock exchange. It provides services for the video game industry including artwork, translation, and music creation. Twenty-four of the top twenty five games companies are among its customers, including Activision Blizzard and Electronic Arts. Also included are Microsoft, Netflix, Tencent, Ubisoft, Epic Games, Microsoft and Netflix. It employs 13,000 employees in 70 offices across Asia, Australia and the United States, and Europe.
EQT stated that the company could expand its business into other sectors, including media and entertainment. It said that Keywords would be more successful if it were a private company. This way, they could develop a long-term strategy and expand their M&A activities.
The global gaming services industry is characterized by constant innovation and change, which has been accelerated by the advent of generative artificial intelligence,” said the report. Operating in the private market, along with additional capital would allow Keywords Studios invest in innovation, which is essential to maintain its status and keep up with the pace of change.
EQT was founded in Sweden over 30 years ago and has invested in Britain for almost two decades. In 2006, it made its first major investment when it purchased SSP Group which operates food outlets at travel hubs. The business was then floated. It has recently acquired Dechra Pharmaceuticals (the pet medicine business) and has now more than 15 portfolio companies in the UK. It has 1,000 institutional investors backing it, and 30% of the funds are raised in America.
EQT reported that two of the largest shareholders in the company, Franklin Templeton, and Pictet had also indicated their intention to support the transaction.
The deal is part of a trend whereby publicly listed British companies are being taken private by overseas investors who seek bargains on London’s undervalued stock market.
In the early 1980s, children playing with early computers in their bedrooms had no idea they were part of the British economic success story. (Katie Prescott).
The BBC Micro was a low cost computer that was developed by Acorn Computers in Cambridge to prepare younger generations for the digital age.
It was part of the BBC’s computer literacy project and featured a number of educational books and television shows. It was a great platform for budding programmer to share and create their games, as schoolchildren were encouraged by the BBC to experiment with technology.
Dizzy was a British video game series that was very popular in the 1980s.
Andrew and Philip Oliver were among them. They were twins, who at age 12 in 1980 became interested in gaming by playing Space Invaders. They later created the popular ” dizzy” series which featured an egg doing somersaults through a fairytale world.
David Darling and Richard Darling are the other brothers who formed Codemasters. They are the software specialists behind BMX Simulator, Rock Star ate my Hamster, and HTML2_ BMX Simulator HTML2_.
There was also the Lemmings series, which became a huge hit in 1991. It was published by DMA Design. The Dundee company was founded by amateur computer club members in the early 80s. It later became Rockstar Games, and produced the Grand Theft Auto franchise.
Since then, gaming education has evolved significantly. Abertay University in Dundee, and University of South Wales are two universities that offer courses in world-class game design and development.
In 2014, video game tax relief was introduced. This incentive allowed developers up to 25% of their production costs to be reclaimed, which provided a significant financial cushion. It also encouraged both established and start-up studios to establish themselves in the UK. This was a precedent for future policy.
According to UK Interactive Entertainment the industry trade group, this sector employs nearly 50,000 people, and its market value is £7,8 billion. The sector’s growth is not slowing down as new technologies like virtual reality and augmented realities open up new frontiers that were beyond the wildest dreams of those bedroom pioneers.
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