Take-Two Interactive is Buying Codemasters for $1 Billion. Why It Could Trigger Rival Bids.
European computer games maker Codemasters Group, which specializes in car racing games, has agreed a £759 million ($1.06 billion) takeover by Grand Theft Auto publisher Take-Two Interactive.
The deal announced on Tuesday will see Take-Two pay 485 pence a share for its British rival and comes four months after Codemasters was tipped in Barron’s as undervalued at 341 pence. If readers had invested they would have seen a 42% increase on their holding.
But some investors think the deal undervalues the stock and could trigger rival bids. “The bid for Codemasters is not as high a valuation as some of the other quoted businesses in the gaming space trade on,” top-15 shareholder Columbia Threadneedle Investments, told The Times. “We wouldn’t be surprised if there were competing bids in the coming weeks.”
The cash-and-stock offer was originally announced last week, but on Tuesday Codemasters put out a statement saying: “The board of directors of Codemasters and the board of directors of Take-Two are pleased to announce that they have reached agreement on the terms of a recommended cash and shares offer to be made by Take-Two for the entire issued and to be issued share capital of Codemasters.”
The deal is expected to close in the first quarter of 2021.
Through its labels Rockstar Games, 2K, Private Division, and Social Point, Take-Two develops and publishes Grand Theft Auto, Red Dead Redemption, and NBA 2K.
Codemasters owns F1, the successful Formula One racing championship game, and recently agreed a five-year franchise-to make FIA World Rally Championship, giving it the top global motor sports intellectual property, and it has a strong pipeline of future games.
In the statement it said Take-Two “believes that the combination of Take-Two and Codemasters would bring together two world-class interactive entertainment portfolios, with a highly complementary fit between Take-Two’s 2K label and Codemasters.”
The rationale is Take-Two believes it can enhance Codemasters’ performance by leveraging Take-Two’s distribution and marketing skills, together with Take-Two’s expertise in analytics, product development, and brand and performance marketing.
Strauss Zelnick, the chairman and chief executive of Take-Two, said: “Codemasters has a renowned history of creating some of our industry’s most beloved and commercially successful racing franchises, and we believe that their offerings will be highly complementary to our sports portfolio and enhance further our organization’s long-term growth.”
Shareholders would need to approve the deal which will see another computer games company from the U.K. bought by a foreign rivals. Britain used to be home to what was once one of the world’s largest computer games hubs hosting Tomb Raider owner Eidos, Sci Entertainment and Liverpool based Psygnosis. All have since been bought out.
Codemasters was started back in 1986 by two brothers David and Richard Darling who had cut their programming teeth after persuading a janitor to give them access to the school computer. As teenagers they got their own Vic-20 computer and designed budget games earning £200,000 by the time they were 16 and 17-years old.
By 2010 and Indian firm Reliance Big Entertainment took a 50% stake in the firm increasing it to 60.41% by 2013.
It floated on London’s junior AIM market in 2018, which after two subsequent share placings eventually saw Reliance exit.
Hollywood gets back to work as film permits rise 24 percent
Hollywood is slowly returning to work after the pandemic devastated film and TV production this year.
According to FilmLA, a nonprofit group that tracks production in Tinseltown, more sitcoms, reality shows and movies were shooting in Hollywood in October than in previous months.
The group said over the last 20 weeks, it has received roughly 2,500 film permit applications for nearly 2,000 movie and TV projects. Monthly applications to shoot rose 24 percent in October to 880 permits.
Overall, shooting is still under 47 percent of what analysts would expect under normal filming conditions, FilmLA said.
Still, the rise marks a stabilization in filming activity, the group said, pointing to a host of shows that filmed last month, such as CBS’s “NCIS LA,” Showtime’s “Shameless” and ABC’s “Dancing with the Stars” and “American Idol.”
The group also called out feature films that are shooting locally in LA, such as “Soggy Bottom,” a Paul Thomas Anderson movie with Bradley Cooper that is set in San Fernando Valley in the 1970s, and Warner Bros.’ “King Richard” biopic starring Will Smith as Richard Williams, the father of tennis powerhouses Venus and Serena Williams.
FilmLA president Paul Audley touted the slow return of shooting in Hollywood, adding that safety is paramount in continuing to make improvements.
“To push past our current production plateau with full community support, we need to continue to focus on keeping our workplaces safe,” he said.
look optimistis, depends what means coming...
Gapping down
In reaction to earnings/guidance:
- VRM -11.7%, RVLV -10%, HYLN -7.6%, SPTN -6%, ENR -5.2%, GOCO -5%, SBH -4%, OM -3.6%, FLR -3.1%, TDG -2.6%, GDRX -2.3%, RVMD -1.8%, ATO -1.7% (also increases dividend), SWTX -1.7%, ENS -1.3%, WIX -1.3%, SSYS -1.2%
Other news:
- USCR -6.6% (acquires assets of Sugar City Building Materials)
- ALGT -3.1% (reports October traffic)
- MOR -1.8% (INCY, XNCR and MOR announce global collaboration for tafasitamab)
- PRVL -1.6% (details arbitrator prior decision with FAQ)
- AZN -1.2% (reports CALAVI Phase II trials for Calquence in patients hospitalised with respiratory symptoms of COVID-19 did not meet primary endpoint)
- MPC -1% (new CFO)
- FRC -1% (stock offering)
Analyst comments:
- TBK -2.5% (downgraded to Mkt Perform from Outperform at Keefe Bruyette)
- CRM -1.8% (downgraded to Equal-Weight from Overweight at Morgan Stanley)
- IFS -1.5% (downgraded to Neutral from Overweight at JP Morgan)
- ALC -1.4% (downgraded to Neutral from Buy at Guggenheim)
- CFR -1.4% (downgraded to Mkt Perform from Outperform at Keefe Bruyette)
- WSM -1.3% (downgraded to Accumulate from Buy at Gordon Haskett)
- FSK -1% (downgraded to Underweight from Equal Weight at Wells Fargo)
National Grid ‘open’ to relinquishing electricity system role
UK group awaits decisions on who should operate the network and what returns can be made
National Grid said it was open to giving up its role managing the UK’s electricity system following reports it could be stripped of its responsibilities balancing the country’s supply and demand.
Ofgem, the energy regulator, has been examining the matter following suggestions from politicians and academics that a public body should take charge of the system as the country strives to meet a 2050 goal to cut emissions to net zero.
Press reports at the weekend suggested a decision could come shortly after a government energy white paper that has been repeatedly delayed, but is expected before Christmas.
“We remain open to the [system operator] role evolving going forward,” said John Pettigrew, chief executive of National Grid, although he insisted the arrangements had worked well.
“Whatever the outcome is, it needs to be something that is stable for the next several years as we gear up to deliver net zero [and] it needs to make sure that it supports the overall agenda around net zero more than the existing institutional arrangement does,” Mr Pettigrew said after publishing the company’s half-year results on Thursday.
The electricity system operator was spun into a legally separate entity following a previous review in 2017 but nevertheless remains part of the National Grid group.
It accounted for about 3 per cent of the group’s £1.15bn of underlying operating profits for the six months to September 30, which were down 12 per cent year-on-year owing to coronavirus-related costs such as higher bad debts from US customers.
Mr Pettigrew said it was too early to say how the company should be recompensed should it be stripped of the role.
National Grid is also awaiting a regulatory decision in December that will decide returns for energy network companies from April next year. Ofgem proposed in July to slash returns by almost half.
Mr Pettigrew said the company was in almost daily talks with the regulator, adding he was “hopeful we will get to a sensible outcome”.
National Grid said on Thursday it planned to continue raising its dividend “at least” in line with inflation despite the knock to its profits from the pandemic.
Underlying operating profit, which strips out exceptional items, fell to £1.1bn in the six months to September 30 from £1.3bn, although on a statutory basis it improved 13 per cent to £1.1bn as the company benefited from one-off gains, including from “commodity remeasurements”.
The group had already warned in June that its underlying operating profit would take a £400m hit over the full year, although it believes it can recover much of the impact in future years.
Shares were up marginally, by about 0.5 per cent, at midday in London.
Gapping up
In reaction to earnings/guidance:
- FOSL +25.5%, PDD +21%, IGT +11.4%, GRWG +8.4%, XPEV +7%, HIMX +6.8%, SOL +5.7%, MFC +5.5%, HI +5.4%, EPC +5%, SSRM +3.5%, ICL +2.8%, CMPS +2.8%, NVEE +2.1%, GTBIF +2%, MTOR +2%, SDGR +2%, INMD +1.5%, DAVA +1.4%, MPLN +1%
Other news:
- FPRX +23.9% (presents first preclinical data on anti-CCR8 antibody FPA157; also stock offering)
- INBX +9.4% (announces "positive" interim results from Phase 1 trial of INBRX-109)
- CSTL +7% (presents data on DecisionDx-Melanoma and DecisionDx DiffDx™-Melanoma tests at american society of Dermatopathology 57th Virtual Annual Meeting)
- BIOX +6.8% (acquires full ownership of HB4 Soy and strategic intellectual property rights for wheat from Arcadia Biosciences (RKDA))
- BZUN +4.2% (sets New Total Order Value Record for 11.11 festival of RMB16.50 bln)
- PDLI +4% (to file a certificate of dissolution in Jan)
- CVAC +3.4% (CureVac's COVID-19 vaccine candidate, CVnCoV, suitable for standard fridge temperature logistics)
- MRNA +3.1% (completes case accrual for first interim analysis of phase 3 COVE study of mRNA-1273)
- SNPS +2.9% (acquires Moortec)
- CTRA +2.3% (to divest Cumberland Mine, Pennsylvania assets; expected to accelerate Contura's strategic exit from thermal coal production)
- JWS +2.2% (Cano Health to become publicly traded via merger with Jaws Acquisition Corp)
- QGEN +1.3% (starts commercialization of portable digital SARS-CoV-2 antigen test in the US)
- AB +1.3% (reports preliminary AUM for Oct)
Analyst comments:
- ACCO +5.5% (upgraded to Overweight from Sector Weight at KeyBanc Capital Markets)
- NOW +2.8% (upgraded to Overweight from Equal-Weight at Morgan Stanley)
- PCG +1.8% (upgraded to Outperform from Peer Perform at Wolfe Research)
- EPAM +1% (upgraded to Buy from Neutral at BofA Securities)
Early premarket gappers
- Gapping up:
- FOSL +30.7%, PDD +18.9%, FPRX +14%, HIMX +12.2%, XPEV +10.3%, INBX +9.4%, GRWG +9.3%, NVEE +6.7%, IGT +5.9%, MFC +5.5%, HI +5.4%, MRNA +4.9%, SOL +4.8%, PDLI +4%, SSYS +3.5%, SFL +3.3%, BZUN +3.1%, ICL +3.1%, TTEK +2.6%, JWS +2.5%, GTBIF +2%, QGEN +1.9%, EPC +1.9%, BABA +1.8%, TNK +1.4%, AB +1.3%, ESPR +1.2%, SF +1.1%, REYN +1%, NICE +0.7%
- Gapping down:
- VRM -9.9%, RVLV -9.5%, USCR -6.6%, SPTN -6.5%, GOCO -4.5%, OM -3.6%, ALGT -3.1%, MOR -3.1%, PRVL -1.6%, ENS -1.3%
Burberry plans to cut discounting despite hit to revenues
Luxury retailer is determined to retain brand strength after attracting new customers in China, South Korea and US
Burberry is planning to reduce markdowns on its bags and clothes, betting that sacrificing short-term income to retain a stronger brand will help lift profits that have suffered in the wake of the pandemic.
The British luxury retailer on Thursday warned of a hit to revenues in the second half of its financial year, as it prepared to unwind discounts, despite lockdowns in Europe forcing roughly 10 per cent of its stores to shut.
“With the brand resonating and attracting new and younger consumers, we have taken the decision to reduce markdowns,” the company said. “This will be a revenue headwind [the second half of this financial year] but will serve the long-term interest of the brand.”
Burberry’s clearance sale will now feature fewer products, start later and last for a shorter duration of time.
Julie Brown, chief operating and chief financial officer, called the move an “opportunity to strengthen the brand” following strong demand from new consumers in the past few months, particularly in China, South Korea and the US.
Strong trading in the three countries helped the brand’s comparable store sales improve and return to growth in October, after sagging as much as 45 per cent in the quarter covering the spring.
But the uptick in demand failed to offset low sales throughout the pandemic, with Burberry badly hit as it relies heavily on in-store sales and international tourism. Pre-tax profits were down 62 per cent to £73m in the six months to September, compared with the same period last year. Sales dropped 31 per cent to £878m.
Investors were nevertheless reassured by the company’s announcements, which included a plan to review currently suspended dividends at the end of the financial year. Burberry’s share price, which is down more than a quarter since a peak in January, rose more than 3 per cent on Thursday morning.
Ms Brown said Burberry was now facing a triple whammy of the pandemic, Brexit and the UK government’s recent decision to scrap value added tax relief for overseas visitors.
Roughly two-thirds of the brand’s sales in the UK were made to foreign visitors, she said, adding that “tourists may now go into other European cities where they can reclaim the VAT”.
“Burberry may still pick up consumers overseas but the UK might lose the business, which is important also to hotels and restaurants,” she said.
Ms Brown added that if no Brexit deal was struck, the company was expecting to pay additional duty in the “low tens of millions”.