The board of Keywords Studios PLC announced on Wednesday its support for a £2.1 billion ($2.7 billion) takeover bid by Swedish private equity firm EQT AB. This move signifies the latest company to exit London's capital markets.

Keywords Studios EQT's £2.1B Takeover Offer : Details of the Offer

Keywords and EQT have agreed on a cash deal valuing Keywords at 2,450 pence per share. This represents a 66.7% premium over Keywords' closing price of 1,470 pence on May 17, the day before the offer period commenced. The total share capital is valued at £2.1 billion under the proposed terms.

DLA Piper UK LLP is serving as the legal adviser to Keywords Studios, with a team led by London corporate partner Jon Earle and Dublin corporate services head Matthew Cole. The team also includes legal director Karin Kirschner, senior associate Blayre McBride, and associate Kate Kinsella.

Legal and Financial Advisers

Simpson Thacher & Bartlett LLP is the legal adviser for EQT and its bidding company, Houting UK Ltd. Kirkland & Ellis is providing financial counsel to EQT and the bidco. Houting plans to finance the acquisition through cash from EQT, Canada Pension Plan, and Temasek, a Singapore investment firm. Debt financing will come from JPMorgan Chase Bank NA.

Shareholder and Market Reaction

Keywords Studios, a key service provider to video game giants such as Activision Blizzard Inc. and Sega Corp., showed initial support for the 2,450 pence offer on June 28. This was despite an earlier, higher proposal of 2,550 pence per share in May. The revised offer followed EQT's due diligence and Keywords’ announcement of slightly negative expected first-half growth.

EQT believes that taking Keywords private will facilitate its growth potential. “Operating in the private markets, coupled with additional capital, would enable Keywords Studios to invest in innovation that is essential for it to keep up with this pace of change and sustain its status as the global gaming services market leader,” EQT stated.

Shares in Keywords rose 2.76% on Wednesday morning to 2,382 pence, up from 2,318 pence at Tuesday's close.

Keywords Studios EQT's £2.1B Takeover Offer : Industry Insights

Russ Mould, investment director at AJ Bell, remarked on Keywords' successful run on AIM, where it was valued at £49 million upon its 2013 IPO. “At its peak in 2021, Keywords was valued at £2.5 billion. The gaming industry has faced challenges recently, leading to a significant share price drop in 2023. However, EQT has identified an opportunity to acquire a comprehensive entity at a slight discount.”

Regulatory and Shareholder Approval

The transaction will proceed under a scheme of arrangement under the Companies Act 2006, requiring 75% shareholder approval at a general and court meeting. Keywords’ board, deeming the terms "fair and reasonable," intends to "unanimously recommend" shareholder approval.

Chair Don Robert highlighted the broader industry challenges and volatile returns over the past fifteen months as reasons for backing the offer. "On balance, the board believes that this offer represents a good opportunity for Keywords Studios shareholders to realize value for their investment in cash," he said.

Keywords Studios EQT's £2.1B Takeover Offer : Key Supporters and Timeline

Keywords' directors, holding 0.06% of shares, have committed to voting in favor. Franklin Templeton Institutional LLC and Banque Pictet & Cie SA, holding 7.57% collectively, have also agreed to support the deal.

The takeover awaits antitrust clearance in several countries, including the U.K., Ireland, the U.S., Finland, Austria, Cyprus, Denmark, and Turkey. Completion is expected by December.

JP Morgan Cazenove is the financial adviser to EQT and Houting, while Deutsche Numis and Robey Warshaw LLP advise Keywords.