- Shares jump 70% on private equity takeover talks
- Four prior unsolicited proposals rejected
- Sweden’s EQT has until 15 June to make formal offer
Private equity groups continue to pick-off some of the UK’s best assets with news over the weekend that Sweden’s EQT is in advanced talks with Keywords Studios (KWS:AIM) to buy the video games services company for £25.50 in cash.
The potential offer equates to a 73% premium to Friday’s (17 May) closing price and comes after the board rejected four previous unsolicited proposals in recent months.
The board said the current potential offer represents a ‘significant’ increase on the initial proposal by EQT.
After careful consideration, the board said it would be minded to recommend the proposal to shareholders should a firm offer be made which, under stock exchange rules must be made by close of play on the 15 June.
‘In the meantime, Keywords Studios shareholders are strongly advised to take no action’, the company said.
The board said it remains confident in the company’s growth strategy of ‘building the only truly global platform providing solutions to the video games and entertainment industries, both organically and through acquisitions, and EQT is supportive of this strategy’.
Shares in Keywords Studios jumped as much as 70% to £24.98 in early trading before settling down to £23.64, a new 12-month high. They remain around 25% below their all-time high of £33 reached in September 2021.
Since listing on AIM in July 2013, the shares have increased 19-fold, equivalent to a compound annualised growth rate of 30% a year, making them one of the most successful shares to list on the UK stock market.
EXPERT VIEW
Noting post-pandemic share price weakness, Shore Capital’s Katie Cousins said she believes Keywords is well positioned to benefit from continued outsourcing trends in the video gaming industry.
‘That being said, whilst still growing, the organic growth has slowed over the past few years and profit margins appear fairly fixed over the medium term’, added Cousins.
The analyst has reduced her recommendation to hold from buy given the latest share price move takes them above her £18 price target.
Issue Date: 20 May 2024