Keywords Studios agrees €2.5bn bid from private equity firm EQT

A consortium led by Swedish private equity group EQT has agreed to acquire Irish video games company Keywords Studios in a £2.2 billion (€2.5 billion) deal, underlining the fertile hunting ground for buyers in London’s stock market.

Keywords, based in Dublin and listed on London’s junior market AIM, accepted a lower price than a previous bid from EQT after Keywords announced that some projects had been delayed and cancelled.

The £2.2 billion deal, which includes debt, comes after the Financial Times reported in May that EQT had made four unsolicited proposals to buy the video games company.

The price of £24.50 per share represents a 66.7 per cent premium to Keywords’ closing price at the start of the offer period on May 17th – but is lower than an earlier £25.50-per-shar bid.

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The deal, which boosted Keywords’ shares by 3 per cent to £23.82 by Wednesday lunchtime in London, gives EQT a 51 per cent stake, with Singaporean state-owned investment company Temasek and Canada Pension Plan Investment Board taking 24.5 per cent each.

The company,z which was valued under £50 million just over a decade ago when it first listed, has worked on blockbuster titles including Fortnite and League of Legends. Its services include providing art and marketing.

The group has expanded rapidly since going public by acquiring more than 60 companies, including support studios.

Keywords 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.

Its shares have fallen nearly 30 per cent since peaking in September 2021 as investors worried that some of its services, such as translation, might be disrupted by artificial intelligence.

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

“Keywords is mindful of the near-term challenges in the broader video games and entertainment industries, as well as other longer-term uncertainties, which have caused volatile returns for Keywords Studios’ shareholders over the past 15 months,” said Keywords’ chair Don Robert, who is also chair of the London Stock Exchange.

He added that the company’s board believed the offer represented a “good opportunity for shareholders” and that it remained confident about its growth plan.

Two top Keywords shareholders, Franklin Templeton and Pictet, have said they will vote in favour of the transaction, according to EQT.

Jean Salata, chair of EQT Asia, said the firm planned to draw on experience in the services and technology sectors to support management and invest further in innovation, talent and mergers and acquisitions.

The acquisition, set to complete in the fourth quarter of 2024, follows EQT’s previous purchase of UK-listed businesses such as veterinary pharmaceuticals company Dechra. The group has €242‌ billion of assets under management.

James Lockyer, an analyst with Peel Hunt, said the deal fairly reflected both the strength of the business and its future prospects but “there is more value to be played on”.

– Copyright The Financial Times Limited 2024