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
Aloqador aktivlar
Eng oxirgi yangiliklar
Javobgarlikdan voz kechish: XM Group korxonalari har biri faqat ijro xizmatlarini koʻrsatadi va onlayn savdo platformamizdan foydalanish huquqini beradi, bu odamga veb-saytda yoki veb-sayt orqali mavjud boʻlgan kontentni koʻrish va/yoki undan foydalanishga ruxsat beradi hamda uni oʻzgartirishga moʻljallanmagan va uni oʻzgartirmaydi yoki kengaytirmaydi. Bunday kirish va foydalanish huquqi doimo quyidagilarga boʻysunadi: (i) Shartlar va qoidalar; (ii) Risklar haqida ogohlantirish; va (iii) Javobgarlikni toʻliq rad etish. Shuning uchun bunday kontent umumiy maʼlumot sifatida taqdim etiladi. Xususan, shuni esda tutingki, bizning onlayn savdo platformamiz mazmuni moliyaviy bozorlarda biror bitimni amalga oshirishga oid maslahat yoki taklif emas. Har qanday moliyaviy bozorda savdo qilish sizning kapitalingiz uchun jiddiy risk darajasini oʻz ichiga oladi.
Onlayn savdo platformamizda chop etilgan barcha materiallar faqat taʼlim/axborot maqsadlari uchun moʻljallangan va unda moliyaviy, investitsiya soligʻi yoki savdo maslahatlari va tavsiyalar; yoki bizning savdo narxlarimizning qaydlari; yoki har qanday moliyaviy vositalar bilan bitim tuzish maslahati yoki taklifi; yoki sizga kerak boʻlmagan moliyaviy reklama aksiyalari hisoblanmaydi
Har qanday uchinchi tomon kontenti, shuningdek XM tomonidan tayyorlangan kontent, masalan: fikrlar, yangiliklar, tadqiqotlar, tahlillar, narxlar va boshqa maʼlumotlar yoki bu veb-saytda joylashgan uchinchi tomon saytlariga havolalar umumiy bozor sharhi sifatida "boricha" taqdim etiladi va investitsiya maslahatini tashkil etmaydi. Har qanday kontent investitsiya tadqiqoti sifatida talqin qilinsa, siz bunday kontentni investitsiya tadqiqotlarining mustaqilligini ragʻbatlantirish uchun moʻljallangan qonun talablariga muvofiq moʻljallanmagan va tayyorlanmaganligini eʼtiborga olishingiz va qabul qilishingiz kerak, shuning uchun unga tegishli qonunlar va qoidalarga muvofiq marketing kommunikatsiyasi sifatida qaraladi. Mustaqil boʻlmagan investitsiya tadqiqoti va yuqoridagi maʼlumotlarga oid risk haqida ogohlantirishimizni oʻqib chiqqaningizga va tushunganingizga ishonch hosil qiling, unga bu yerdan kirish mumkin.
