Take Two’s $994 million Acquisition of Codemasters

By Aman Sharma, Gustaf Baavhammar, Christopher Lewis, Richard Isbister, Peter Moravec (London Business School)


Overview of the deal

Key Update (14/12/2020): Since publishing this report, Electronic Arts (NASDAQ:EA) has launched a rival bid totalling £945 billion for Codemasters, an all-cash offer of 604p per share. Codemasters’ board has since withdrawn its recommendation of Take-Two’s original offer and instead has recommended Electronic Arts’ counter-offer to its shareholders. Codemasters’ shares jumped 22.8% over the weekend following the announcement to ~656p, indicating that the market expects a bidding war to escalate.

Acquirer: Take-Two Interactive Software (NAS: TTWO)

Target: Codemasters Group Holdings plc

Implied Equity Value: £759 million ($994 million)

Total Transaction Size: £708.916 million (-£50.084 million Net Debt)

Closed date: 31st March 2021 (Expected)

General Advisor to Acquirer: Goldman Sachs

Legal Advisors to Acquirer: Axinn, Veltrop & Harkrider; Harbottle & Lewis; Van Bael & Bellis; Willkie Farr & Gallagher

General Advisors to Target: Liberum; Jefferies International

Legal Advisors to Target: Gowling WLG; Reed Smith

After a very strong 9 months for the gaming sector amid the global stay-at-home mandate, Take-Two has agreed to acquire Codemasters in a cross-border deal offering Codemasters’ shareholders the following in exchange for each common share they hold:

  • 120 pence per share cash offer

  • 0.02834 common shares of the combined entity

Overall, this offer values each Codemasters share at £4.85 per share at an implied equity value of £759 million.

While Take-Two is still conducting due diligence on the company ahead of the takeover, it believes that it can unlock additional value by combining Codemasters’ prominent portfolio of racing video games with its global distribution network and core operating expertise in analytics, product development and marketing. Furthermore, Take-Two will hope to realise synergies by enhancing its own sports portfolio under the 2K brand, with titles such as NBA basketball and PGA golf. While some major video game publishers like Electronic Arts and Activision Blizzard have hinted that the pandemic’s boost for gaming may be starting to fade, Codemasters’ fundamentals are still very promising. The company recently signed an exclusive five-year deal with the World Rally Championship and achieved 100% year-on-year revenue growth* after three well-received title launches, including its most successful F1 release to date.

“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.” - Strauss Zelnick, CEO of Take-Two

*For the six months up to 30th September 2020

Company Details: Acquirer – Take-Two

Take-Two is one of the largest independent video game publishers, operating the two labels Rockstar Games and 2k. Headlining their portfolio are the franchises “Grand Theft Auto” and “NBA 2k” that have sold hundreds of millions of units worldwide.