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EQT moves towards £2.1bn takeover of UK-listed Keywords Studios

Dublin-based games company ‘minded to recommend’ slightly lower offer from European private equity group

Keywords has worked on games such as Fortnite, above, and League of Legends

Ivan Levingston and Maxine Kelly
Fri Jun 28 2024 - 12:11

The private equity group EQT has slightly lowered its bid to acquire Keywords Studios to about £2.1 billion (€2.4 billion), as the London-listed video game services company reported some of its projects were delayed or cancelled.

The board of Keywords said it would be “minded to recommend” the latest price of £24.50 per share, which marked a small decrease from EQT’s proposal in May.

EQT had made four unsolicited offers for Keywords that were rejected, before entering advanced discussions last month over a proposed bid of £25.5 a share.

That offer would have valued the Dublin-based company at about £2.2 billion and represented a more than 70 per cent premium to the stock’s value at the time.

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Keywords said in a trading update on Friday that it had a “small number of larger game development projects being deferred into [the second half of the year] or cancelled” alongside other areas of softer demand.

Keywords added it faced softer demand, and forecast its reported revenue to rise about 7 per cent in the first half of the year. It said that second-half organic growth would be about 10 per cent, which is in keeping with its medium-term guidance.

Keywords provides services from game art to marketing and testing. The company’s clients include Activision Blizzard, Electronic Arts and Tencent, and it has worked on games such as Fortnite and League of Legends.

The company is listed on London’s junior Aim market, and floated in 2013 at a market valuation of less than £50 million before its stock took off.

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More recently, its share price has halved from a peak in September 2021, as investors worried about the potential for some of its services, such as translation, to be disrupted by artificial intelligence.

The company reported record revenues of €780 million in 2023, up 13 per cent year on year, while its pretax profit plunged 49 per cent to €35 million.

Sweden’s EQT is among the biggest private investment firms and has previously bought UK-listed groups such as veterinary pharmaceuticals company Dechra.

EQT’s updated cash offer of £24.50 per share would mark an uplift of 13 per cent on Keywords’ last closing price of £21.72, and a slight increase from the £24.30 that it put forward on Wednesday.

The discussions between EQT and Keywords come as takeover interest in UK-listed companies reached its highest level since 2018, driven by depressed share prices that are attracting foreign investors. Keywords has agreed a short extension in talks from Friday to July 3rd, when EQT faces a deadline under UK takeover regulations to make a firm offer or walk away.

– Copyright The Financial Times Limited 2024

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