Neglected, unloved, UK-listed companies are increasingly attracting overseas takeover interest. 

Rather like the proverbial 29 bus, from a dearth of bid interest a few months ago there has been a flurry of activity in recent weeks. Data from Dealogic shows the value of UK takeover bids in 2024 is $78 billion and running at the highest pace since 2018.

The latest deal (20 May) sees Keywords Studios (KWS:AIM) in advanced talks with Swedish private equity firm EQT in an all-cash transaction valuing the global video game services provider at £2.2 billion.

News of a potential bid shouldn’t come as a surprise to Shares’ readers after we identified the outsourcing specialist’s depressed share price and undeserved PE de-rating as an attractive buying opportunity in September 2023.

Keywords’ management finally broke cover after EQT made a fifth unsolicited approach pitched at £25.50 per share which the board said represented a ‘significant’ increase on the initial proposal.

The price represents a 73% premium over the prior closing price and led to a 60% jump in the shares on the day of the announcement.

At the current juncture the board is advising shareholders to hold tight as EQT completes due diligence, while the directors said they were minded to recommend the offer.

Under stock exchange rules, EQT which is one of Europe’s largest private equity managers with €242 billion in assets under management, has until 15 June to make a formal offer.

The company said it remains confident in its growth plans which continues to be a mix of organic-led expansion augmented by acquisitions.

Acquisitions have been a key driver of growth, with Keywords spending around €600 million over the years to gain access to a wide range of niche skills as well as broaden its geographical spread. This has brought the company significant cross-selling opportunities and insight into client needs.  

The company’s services include localisation of content which helps game makers launch into multiple markets and languages simultaneously. Keywords also provides its services to the film and television industries.

Despite having a market share of just under 6%, Keywords is more than three times the size of its nearest competitor, according to Numis, making it the largest outsourcing gaming platform in the world.

Since listing on AIM in July 2013, Keywords Studios’ shares have increased 19-fold, equivalent to a compound annualised growth rate of 30% a year, making it one of the most successful firms to list on the UK stock market.

‹ Previous2024-05-23Next ›