Electronic Arts drives Codemasters/Take-two deal off-course

Electronic Arts drives Codemasters/Take-two deal off-course

Codemasters Group Holdings Inc may find itself the subject of a bidding war this Christmas, after US video game giant Electronic Arts Inc (EA) announced a firm offer for the company on 14 December.

The offer comes a month after one of EA’s main rivals, Take-Two Interactive Software Inc, (the creator of Grand Theft Auto), announced a firm offer for Codemasters valuing the UK video game company at £759 million. The Codemasters board recommended that shareholders accept the Take-Two cash and shares offer, which would guarantee the directors’ job security.

The deal led to backlash from some investors who claimed the offer was too low, while others were unhappy that US securities would make up some of the consideration. However, Codemasters withdrew its recommendation for the Take-Two offer shortly after EA announced its all-cash competing offer that would value the AIM 100 company at £945 million, quashing the likelihood of a shareholder revolt.

The board of Codemasters have announced that they intend to unanimously recommend the EA offer instead, stating that it represented a ‘superior offer for Codemasters shareholders as compared with the Take-Two Offer’.

Notably, despite the recommendation the board is unable to provide irrevocable undertakings to vote in favour of the EA offer, after providing undertakings to Take-Two, which are to remain binding in the event of a competing offer.

Codemasters has seen its share price rapidly increasing since the onset of the pandemic, as global sport tournament cancellations saw a rise in popularity for sporting games. In line with this, Formula One held an e-sports tournament earlier this year based on Codemasters software. The competing offer has further pushed up its share price, with shares closing 23% higher on 14 December than on 11 December (being the last business day prior to the announcement).

Commenting on the acquisition, EA CEO Andrew Wilson said the following:

Our industry is growing, the racing category is growing, and together we will be positioned to lead in a new era of racing entertainment. We have admired Codemasters' creative talent and high-quality games for many years. With the full leverage of EA's technology, platform expertise, and global reach, this combination will allow us to grow our existing franchises and deliver more industry-defining racing experiences to a global fan base.’

 EA, who are behind the massive Need for Speed franchise and the Fifa games, is considered to be the second largest gaming company in the US and Europe by revenue, with revenues of over £4 bn, compared to Take-Two, who boasted revenues of just over £2 bn in 2020. 

Take-Two responded that it is considering its position in light of the news and will make a further announcement in due course.

Market Tracker will continue to monitor this transaction as it develops. 

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