Warner Bros Ups Stake in SCi

Eidos parent company, SCi, is raising £60 million by creating new shares. Warner Bros. is taking up to one quarter of those shares.

In total, 171,605,424 new shares have been created at a value of £0.35 per share. SCi's announcement tells us, “Warner Bros will subscribe for up to £15m New Shares”. Prior to the new arrangement, Warner Bros. owned a 10% stake in SCi. This deal doubles that to 20%, making Warner Bros. the second largest shareholder in SCi.

Part of the arrangement will see a distribution deal being set up between SCi and Warner Bros. for the US, Canada and Mexico.

Another chunk of the shares will be bought up by Robert Tchenguiz's Thorson investment company. It is expected that he will become the largest shareholder with a holding of 22%.^†

SCi has stated that, “Following completion of the fund raising the company will have substantial cash balances in addition to its new committed £25 million debt facility.”

As far as the equity raised by SCi's floating of new shares goes, it was rumoured last week that NBC Universal, which is owned by GE and Vivendi, was in line to buy a significant chunk of the new shares (the existence of which was unconfirmed at the time).

This comes following SCi stating on Wednesday that it has rebuffed an offer of a buyout from a mystery suitor. The statement from SCi read, “The Board considers, amongst other things, that the proposal does not represent sufficient value and that, given the group's significant short- to medium-term funding requirements, the pursuit of an uncertain takeover proposal with consequent delay and risks to the company's proposed issuance of new equity to fund the execution of its revised strategic plan would not be in the best interests of the company or its shareholders."

This is not the first time that SCi has been in discussions regarding a potential buyout and decided against it. In January the company concluded, after a period of courting another mystery suitor (rumoured to be Warner Bros. among others), that it would not reach a suitable agreement at that time.

Following that, the company culled several members of its senior management team before announcing that it would relocate a large chunk of its development operations to Canada – cutting jobs and projects in the process – to reduce costs.

SCi informs us, “Current trading is line with expectations and the Company is on track to deliver cost savings of £14m from its rationalisation programme at a cost of £7m, as announced in February.”

Phil Rogers, Chief Executive Officer, SCI Entertainment Group said, “Today we have significantly strengthened our relationship with Warner Bros. one of the world's largest media groups, to create an exciting strategic partnership, giving us increased scale in the North American market, to the benefit of all our major franchises.

“The new financing puts us in a clear position to deliver on the strategic business plan which we announced in February with focus on cornerstone studios and core franchises, delivering high-quality, world class games.”

Kevin Tsujihara, President, Warner Bros. Home Entertainment Group, added, “This investment underscores Warner Bros' commitment to becoming a major presence in the video game business, With SCi's new management team in place along with their track record of rich franchises like Tomb Raider, Hitman and Deus Ex we believe we have formed an exciting partnership and a powerful engine for growth.”

SCi also confirmed that the development of Tomb Raider: Underworld is progressing well.

At the time of press, the last sale of a SCi share was at £0.46.

^{†Source: Reuters}