Codemasters Group Holdings PLC (LON:CDM) sped higher as the video games developer agreed to acquire Project CARS’ creator Slightly Mad Studios for up to £152.2mln.
On Friday the company completed a £20mln placing at a price of 210p to pay an initial £23.3mln instalment for the acquisition, of which £19.4mln will be paid in cash and the remainder in shares
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Codemasters, which already makes the F1 and GRID games, said adding Slightly Mad will increase its competitiveness in the racing game space and add 30% adjusted earnings per share from 2021 onwards, while also adding the presence of founder Ian Bell.
Slightly Mad, which also makes the AAA-rated Need For Speed game, last year made revenues of £7.3mln and a pre-tax loss of £5.2mln, but the previous year when it released Project CARS 2, it made sales of £14.8mln and pre-tax profit of £0.4mln.
It has three games in development for launch during the 2021 financial year, including smartphone game ‘Project CARS GO’ and a game based on a licensed IP relating to a Hollywood blockbuster movie franchise, with a further two games released in its financial year ending 2023.
House broker Liberum forecasts a contribution to underlying earnings of £10mln in 2021, the first full year of ownership.
The remaining £128.9mln of the acquisition payment will be paid with both cash and shares over the next three years, based on the achievement of agreed milestones.
“The enlarged Codemasters will have greater scale and reach, diversified, predictable revenue streams and the opportunity to bring outstanding entertainment to a far wider audience,” said chief executive Frank Sagnier.
Shares zoomed up 11% to 233.7p on Friday morning.
Analysts at Shore Capital said: "We believe this is a good quality and sensible deal for the company, and one that has the potential to increase both operational and financial opportunities."