3rd Jul 2024 10:48
(Alliance News) - The agreed bid for Keywords Studios from private equity firm EQT Group was seen as fair by analysts on Wednesday.
The cash proposal values the Dublin-based provider of technical and creative services for video game production at 2,450 pence per share.
Shares in Keywords Studios rose 2.8% to 2,383.00 pence in London on Wednesday morning.
The offer places a valuation on Keywords of GBP2.1 billion on a fully-diluted basis and implies an enterprise value of GBP2.2 billion.
The acquisition price is lower than EQT's earlier 2,550p per share bid made in May. Keywords subsequently reported in June that some of its projects were delayed or cancelled.
The Keywords' board "unanimously" backed the takeover terms.
Keywords Chair Don Robert said the firm was 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 fifteen months.
"On balance, the board believes that this offer represents a good opportunity for Keywords Studios shareholders to realise value for their investment in cash upfront at a significant premium to the undisturbed share price," Robert continued. "We therefore unanimously recommend the offer to our shareholders."
Berenberg said even though some investors may deem the offer a little "opportunistic" given cyclical pressures and the de-rating due to artificial intelligence, "we think it is fair".
"Ultimately, we believe that Keywords should be able to compound earnings at a [compound annual growth rate] of around 20% through the cycle, through both M&A and organic growth. For this, we think an earnings multiple of 25x is appropriate, which is in line with the offer," the broker commented.
Katie Cousins at Shore Capital said she was "supportive" of the offer, seeing a "decent premium" above recent share price levels which has suffered headwinds from the threat of AI and softer organic growth.
The prospect of a competing bid was seen as unlikely by Jefferies.
"We continue to believe a second bidder won't come, and believe Keywords will be taken private by the end of the year," the broker commented.
By Jeremy Cutler, Alliance News reporter
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Related Shares:
Keywords Studios Plc