EQT’s $3 bln gaming play hits the right buttons
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Oliver Taslic
LONDON, July 3 (Reuters Breakingviews) -EQT EQTAB.ST has found a solid strategy for investing in the unreliable gaming market. The Swedish buyout shop is splurging 2.1 billion pounds on Keywords Studios KWS.L, a business that services game designers like Nintendo 7974.T. The fragmented nature of the outsourcing sector and the target’s long list of clients make it look like a relatively safe bet. Meanwhile, investors in Dublin-headquartered Keywords get to pocket a juicy 96% premium.
Gaming is a risky business. To develop a hit like “Grand Theft Auto V”, companies require multimillion-dollar investments, superstar designers and years of work. And even after all those upfront costs, there’s still the possibility that games will flop.
Keywords, however, is not your average video game company. Instead of taking on this risk, the firm provides “services” to gaming groups, such as translating “Dead Island 2” into different languages. Its wide range of clients helps insulate it, to some extent, from the vagaries of the broader industry. Last year, Keywords’ revenue rose 13%, compared to a roughly flat global video game sector.
That all helps explain EQT’s interest. The private equity firm has offered 2,450 pence a share, a whopping 96% premium to the average share price in the month to May 17, the last business day before the offer period began. Despite that, EQT does not appear to be overpaying. Since Keywords has no obvious big listed peers, outsourcing specialists Capgemini CAPP.PA and Accenture ACN.N and video game giants Take-Two Interactive Software TTWO.O and Electronic Arts EA.O provide a helpful guide. They’re currently valued, on average, at around 16 times these companies’ expected EBITDA in the coming year, according to LSEG data. Including 68 million euros of net debt, EQT's offer pegs Keywords’ enterprise value at around 14 times forward earnings.
There are some potential glitches. One is artificial intelligence: part of the reason EQT was able to offer such a chunky premium is that Keywords’ shares more than halved between the public release of ChatGPT in late 2022 and early May. Some investors fear rampant advances in generative AI could lead Keywords’ clients to simply move services in-house.
The flipside, though, is that much of the technology is not yet up to human levels. Second, with funding from EQT, Keywords can continue to act as a consolidator in a fragmented industry. Keywords’ directors intend to unanimously approve the offer, in stark contrast to other UK-listed takeover refuseniks in recent months. And given Keywords’ shares are trading just below the offer price, the deal could finish the final level.
Follow @Breakingviews on X
CONTEXT NEWS
London-listed video game services group Keywords Studios announced on July 3 that it had agreed to be acquired by Swedish private equity firm EQT for around 2.1 billion pounds ($2.7 billion). On an enterprise value basis, the offer values Keywords at around 2.2 billion pounds, Keywords said.
The offer, worth 2,450 pence a share, represents a premium of around 67% to the closing share price on May 17, the last business day before the commencement of the offer period, according to the statement. It represents a premium of 96% to the volume-weighted average price for the one-month period ended May 17.
Keywords said that its directors intend to unanimously recommend the offer.
Keywords shares were up 2.9% at 2,386 pence at 0730 GMT on July 3.
Keywords Studios share price vs. EQT bid https://reut.rs/4coY6ln
Editing by Aimee Donnellan and Streisand Neto
면책조항: XM Group 회사는 체결 전용 서비스와 온라인 거래 플랫폼에 대한 접근을 제공하여, 개인이 웹사이트에서 또는 웹사이트를 통해 이용 가능한 콘텐츠를 보거나 사용할 수 있도록 허용합니다. 이에 대해 변경하거나 확장할 의도는 없습니다. 이러한 접근 및 사용에는 다음 사항이 항상 적용됩니다: (i) 이용 약관, (ii) 위험 경고, (iii) 완전 면책조항. 따라서, 이러한 콘텐츠는 일반적인 정보에 불과합니다. 특히, 온라인 거래 플랫폼의 콘텐츠는 금융 시장에서의 거래에 대한 권유나 제안이 아닙니다. 금융 시장에서의 거래는 자본에 상당한 위험을 수반합니다.
온라인 거래 플랫폼에 공개된 모든 자료는 교육/정보 목적으로만 제공되며, 금융, 투자세 또는 거래 조언 및 권고, 거래 가격 기록, 금융 상품 또는 원치 않는 금융 프로모션의 거래 제안 또는 권유를 포함하지 않으며, 포함해서도 안됩니다.
이 웹사이트에 포함된 모든 의견, 뉴스, 리서치, 분석, 가격, 기타 정보 또는 제3자 사이트에 대한 링크와 같이 XM이 준비하는 콘텐츠 뿐만 아니라, 제3자 콘텐츠는 일반 시장 논평으로서 "현재" 기준으로 제공되며, 투자 조언으로 여겨지지 않습니다. 모든 콘텐츠가 투자 리서치로 해석되는 경우, 투자 리서치의 독립성을 촉진하기 위해 고안된 법적 요건에 따라 콘텐츠가 의도되지 않았으며, 준비되지 않았다는 점을 인지하고 동의해야 합니다. 따라서, 관련 법률 및 규정에 따른 마케팅 커뮤니케이션이라고 간주됩니다. 여기에서 접근할 수 있는 앞서 언급한 정보에 대한 비독립 투자 리서치 및 위험 경고 알림을 읽고, 이해하시기 바랍니다.