Take-Two approaches UK’s Codemasters in £740m gaming deal

Take-Two Interactive, the US games publisher behind Grand Theft Auto, has approached Codemasters, the venerable British racing game developer, about a potential £739m ($973m) takeover.

The deal would be the latest merger in the video games sector after a bumper year, although some publishers, including Electronic Arts and Activision Blizzard, have suggested that the pandemic’s boost is starting to wane.

It follows Microsoft’s $7.5bn plan to acquire ZeniMax and Zynga’s takeovers of the mobile games makers Peak and Rollic. Take-Two itself in August announced a $192m acquisition of Playdots, which makes puzzle apps.

The tie-up would lead to Codemasters’ Formula One racing franchise joining Take-Two’s stable of sports simulators, including NBA basketball and PGA golf. Take-Two also owns Edinburgh-based Rockstar North, maker of Grand Theft Auto, which has become one of the best-selling of all entertainment franchises.

Codemasters said on Friday afternoon that Take-Two had made a potential offer of 485p per share, made up of 120p in cash and 365p in stock. Take-Two is still conducting its due diligence on the company.

“It is the current intention of the board of Codemasters to recommend unanimously that Codemasters’ shareholders accept the possible offer,” the company said in a statement.

Take-Two said in a statement that it thinks there is “a highly complementary fit between 2K and Codemasters in the racing genre.”

Codemasters’ Brian Lara game, based on the West Indian cricketer

The New York-based company on Thursday reported net revenues for the three months to September of $841.1m, down 2 per cent on the prior year, with net income up 38 per cent to $99.3m.

Under UK takeover rules, Take-Two must make a firm offer before the close of business on December 4 if it wishes to proceed.

Codemasters — known in the industry as “Codies” — was founded by brothers David and Richard Darling in Warwickshire in 1986.

It developed and published games for the Amiga, Amstrad and ZX Spectrum home computers in the 1980s, including the Dizzy series, starring an adventurous egg, and BMX simulators. Codemasters then came to specialise in sports and racing games for PCs as well as Nintendo and Sony PlayStation consoles. Notable products came with the Colin McRae rally driving series, spin-offs of Micro Machines toy cars and cricketing games featuring Brian Lara. For much of the past decade it has released annual instalments of its Formula One, Grid and Dirt racing franchises.

India’s Reliance Entertainment took a 50 per cent stake in Codemasters in 2010, increasing it to a majority holding three years later. At the time several prominent UK games companies, including Tomb Raider publisher Eidos, had been taken over by foreign buyers.

The company had been planning a stock market listing in 2008 but was thwarted by the financial crisis. It eventually floated on Aim, London’s junior market, in mid-2018, raising £185m through a placing at 200p per share. Reliance sold the last of its stake a year ago.

Shares in Codemasters closed up 8 per cent at 470p on Friday after the talks were first reported by the deals site Betaville.

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