Original URL: http://www.theregister.co.uk/2005/03/22/elevation_partners_eidos/

Bono to buy Eidos

Under a blood red income statement

By Tony Smith

Posted in Financial News, 22nd March 2005 10:30 GMT

US venture capital company Elevation Partners is to buy UK games publisher Eidos for $135m (£71m), it emerged last night.

The deal is a straightforward cash purchase, with EP paying 50p a share, 27 per cent above Eidos' Friday closing price of 39p. Eidos' shares rose to 53p this morning on the news. The deal is expected to be transacted through EP subsidiary EM Holdings.

Eidos has been looking for a buyer since last August, when it revealed it was talking to a number of possible partners. The announcement came two months after the publisher revealed its full-year figures would not meet its previous expectations.

Sure enough, come September and the publication of FY2004 numbers, Eidos saw FY2003's £17.4m profit turn into a £22m loss. A 3.8 per cent rise in gross margins to 62.8 per cent proved insufficient to counter an 11.6 per cent decline in turnover. Preliminary figures for FY2004 saw sales total £133.9m, down on the previous year's figure, £151.5m.

Earlier this month, it revealed a FY2005 first-half loss of £28.7m compared to a £7.8m profit a year ago .

Despite owning some big-name franchises, most notably the Lara Croft Tomb Raider titles and the Championship Manager series, its other titles have largely failed to excite buyers. A number of games releases have been hampered by development delays.

To be fair, the industry is having a tough time at the moment, and greater consolidation appears likely. Last December, Electronic Arts acquired 19.9 per cent of French publisher Ubisoft, though the speculation that it might try to grab the rest of the company rallied Ubisoft's shares.

EA has also been rumoured in the past to be interested in Eidos. And there's a connection here with EP: the investment group's partners includes John Riccitello, a former EA president. Also involved are Fred Anderson, until last year Apple's CFO, and, most notably, U2 lead singer Bono.

EP focuses on media, entertainment and consumer-oriented companies, and has said it plans to accrue $1bn (£520m) for investment. ®

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