Shares in games software services provider Keywords Studios (KWS:AIM) rallied 3% to a new life-high of £25.48 after it announced the $50 million acquisition of US games development services firm High Voltage.
Founded in 1993, High Voltage is a full-service games developer based near Chicago and has worked on over 100 games across all genres and platforms. Among its high-profile credits are work on Fortnite, Injustice, Mortal Kombat and Saints Row, along with games aimed at younger players such as Ben-10, Dora The Explorer and Lego Racers.
The firm has grown rapidly in recent years and is forecast to generate earnings before interest, taxation, depreciation and amortization (EBITDA) of $9 million next year.
Keywords is making an initial cash payment of $23.75 million along with $9.75 million of new ordinary shares, followed by a deferred payment of up to $16.5 million in a mix of cash and new shares based on performance targets by the year-end.
ADDING BREADTH AND DEPTH
Keywords chief executive Andrew Day praised the High Voltage team for their ‘deep expertise in the Unreal Game Engine development environment, honed particularly well in recent years through working closely with Epic Games on Fortnite, as well as a track record of having worked with many client proprietary game engines, gaming platforms and game genres, which all adds further breadth and depth to Keywords Studios' existing capabilities.’
Shore Capital analyst Katie Cousins was upbeat on the announcement. ‘We believe this morning’s acquisition could strengthen a key division for the group and potentially open further cross-selling opportunities as well as increasing its global exposure.
‘We remain positive on the outlook for Keywords and based off November’s trading update and also the sequential acquisitions, we upgrade our fair value to 2750p (previously 2580p) which is an 11% upside on the current share price, therefore, we retain our Buy recommendation.’
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