Eidos, creator of the Tomb Raider series, has recommended a 32p-per-share cash bid from Japan’s Square Enix, best known for its seminal Final Fantasy titles – thus valuing the UK’s largest independent game-maker at £84m. That might sound a lot, but given that Eidos used to be worth more than ten times that, shareholders would be forgiven for feeling a bit aggrieved. However, with its videogame sales plummeting around the world, the board has clearly decided to cut its losses…
Eidos warned last month that sales of its latest Tomb Raider game (its flagship title, starring the pneumatic Lara Croft) had failed to sell over Christmas, particularly in the US where retailers refused to stock up on piles of copies in fear of waning demand, and margins were squeezed by heavy discounting. The game-maker said this could result in it missing profit targets, which in turn raised the possibility that it could breach the covenants of its bank loans. Not surprisingly, its stock price took another kicking, plummeting a further 20% on the news.
It’s been a precipitous fall from grace for Eidos, at least in financial terms – two years ago it was trading at more than £4 a share, pushing its value up towards the £1bn mark. However since then it seems to have lost its way – although Lara is still selling steadily, it’s been a while since the company had a smash hit. Perhaps the designers have failed to move with the changing times – for the latest Tomb Raider instalment, they should have had Lara swooping to the rescue of stricken sub-prime lenders, or digging around the balance sheets of disgraced financial institutions.
Still, at least Square Enix is happy – it’s got its hands on one of the gaming industry’s most recognised brands, without paying through the nose for the privilege. ‘Eidos's products are highly complementary to our business and will accelerate our aggressive expansion into Western markets,’ said its president Yoichi Wada smugly today. Although Time Warner may yet spoil the party – the US media giant has built up a 20% stake in Eidos, fuelling rumours of a takeover bid, and it might yet decide to weigh in with a counter-offer.
Shareholders will certainly hope so, since this might push the price up. Although it’ll still be a very long way from the valuation reached in 2007, unfortunately...
In today's bulletin:
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Game over for Eidos as Lara Croft taken captive?
Spanish football's finest beat England in earnings too
Kellogg's is, like, out of order, man