Electronic Arts is attempting to gazump its US gaming rival Take-Two Interactive with a £945m ($1.2bn) offer for UK-based video games maker Codemasters.
If completed, buying Codemasters would rank as EA’s largest deal. But its move has disrupted a planned £759m cash-and-stock deal agreed between Take-Two and Codemasters last month, and there could still be a bidding war.
California-based EA’s cash offer of 604p per share was announced on Monday morning, after talks between the companies were first reported on Sunday. The Codemasters board recommended the new offer, which came 13 per cent above Friday’s closing price of 534p and 56 per cent above its valuation before it emerged as a takeover target in early November.
Codemasters shares jumped by almost 20 per cent on Monday morning in early London trading to 640p, above the offer price, suggesting investors believe a higher bid may be likely.
A deal with EA would unite the Silicon Valley-based publisher’s formidable stable of sports and driving games, including the Fifa soccer and Need for Speed franchises, with Codemasters’ racing simulators, such as Formula One and Dirt.
“We believe there is a deeply compelling opportunity in bringing together Codemasters and EA to create amazing and innovative new racing games for fans,” EA chief executive Andrew Wilson said. “Our industry is growing, the racing category is growing, and together we will be positioned to lead in a new era of racing entertainment.”
EA said it believed it could accelerate Codemasters’ performance by using its expertise in data analytics and live services.
EA is one of the world’s largest video games companies, valued at almost $40bn. It is strongest in the PC and console markets where Codemasters has also focused.
“The board of Codemasters firmly believes the company would benefit from EA's knowledge, resources and extensive global scale — both overall and specifically within the racing sector,” said its chairman, Gerhard Florin.
Take-Two, the maker of Grand Theft Auto and NBA 2K games, and Codemasters had agreed a cash-and-stock deal in early November that initially valued the Warwickshire-based company at about £759m.
Although Take-Two’s share price has subsequently risen, increasing the value of its offer, some Codemasters shareholders had expressed frustration that the 34-year-old games company had accepted only a modest premium to its previous trading levels.
EA said its offer came at a 14 per cent premium to the value of Take-Two’s offer at Friday’s close. A shareholder meeting to consider the offer had been scheduled for next Monday.
The battle for Codemasters follows a year of dealmaking in the gaming industry, capped by Microsoft’s $7.5bn plan to acquire ZeniMax, as the pandemic drew record audiences to both console and mobile games.
Console makers such as Sony and Microsoft, as well as internet groups including Google and Amazon, have been racing to tie up exclusive content rights to win players to their platforms.
Sports games have proven particularly appealing during coronavirus-induced lockdowns as traditional leagues have been unable to play, or forced to do so behind closed doors. That has accelerated momentum in competitive gaming, with Formula One racing running its own professional esports tournament based on Codemasters’ software.
In a note to clients on Sunday night, after Sky News first reported the new talks, analysts at Mirabaud noted that EA’s offer came as Codemasters was riding high on the back of strong reviews for its latest racing game, F1 2020.
“In some respects, EA’s move feels defensive, because they are already under attack from Take-Two and many of their franchises are becoming second-rate relative to leaders,” wrote Neil Campling, head of TMT research at Mirabaud.
UBS advised EA, while Jefferies and Liberum advised Codemasters.
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