RNS Number:1083T
SCI Entertainment Group PLC
25 April 2008
NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION IN WHOLE OR IN PART IN OR INTO THE
UNITED STATES, CANADA, JAPAN, AUSTRALIA OR THE REPUBLIC OF SOUTH AFRICA
(for immediate release at 7 am)
25 April 2008
SCi Entertainment Group plc
PLACING AND OPEN OFFER OF 171,605,424 NEW SHARES AT 35 PENCE PER NEW SHARE,
STRATEGIC PARTNERSHIP WITH WARNER BROS AND ARRANGEMENT OF NEW BANKING FACILITIES
INTERIM MANAGEMENT STATEMENT
Highlights:
* Raising £60m through a fully underwritten placing and open offer of
171,605,424 New Shares
* Strategic distribution agreement with Warner Bros. Home Entertainment Inc. for
the US, Canada and Mexico, to drive growth in the North American market,
additionally Warner Bros will subscribe for up to £15m New Shares
* Current trading is in 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
* Following completion of the fund raising the company will have substantial
cash balances in addition to its new committed £25 million debt facility.
* Progress with Tomb Raider: Underworld remains encouraging and the game is
scheduled for worldwide release before Christmas 2008
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.'
Contact:
SCi Entertainment Group Plc +44 20 8636 3000
Phil Rogers
Chris Glover
Citi +44 20 7986 4000
Matthew Smith (Investment Banking)
Charles Lytle (Corporate Broking)
KBC Peel Hunt +44 20 7418 8900
David Davies (Corporate Finance)
Madano Partnership +44 20 7593 4000
Matthew Moth / Graham Moonie
IMPORTANT NOTICE
This summary should be read in conjunction with the full text of the following
announcement.
* Appendix 1 sets out the expected timetable of principal events.
* Appendix 2 sets out the definitions.
This announcement has been issued by and is the sole responsibility of the
Company.
Citigroup Global Markets Limited, which is regulated in the United Kingdom by
the FSA, is acting as sponsor and Citigroup Global Markets U.K. Equity Limited
which is regulated in the United Kingdom by the FSA, is acting as joint
bookrunner, joint broker and joint underwriter to the Company and no-one else in
connection with the Placing and Open Offer and will not be responsible to anyone
other than the Company for providing the protections afforded to clients of
Citigroup Global Markets Limited and Citigroup Global Markets U.K. Equity
Limited, or for providing advice in relation to the contents of this
announcement or any matters referred to herein.
KBC Peel Hunt Ltd which is regulated in the United Kingdom by the FSA, is acting
as joint bookrunner, joint broker and joint underwriter to the Company and
no-one else in connection with the Placing and Open Offer and will not be
responsible to anyone other than the Company for providing the protections
afforded to clients of KBC Peel Hunt Ltd, or for providing advice in relation to
the contents of this announcement or any matters referred to herein.
Lloyds TSB Bank plc which is regulated in the United Kingdom by the FSA, is
acting as co-lead manager and joint underwriter to the Company and no-one else
in connection with the Placing and Open Offer and will not be responsible to
anyone other than the Company for providing the protections afforded to clients
of Lloyds TSB Bank plc, or for providing advice in relation to the contents of
this announcement or any matters referred to herein.
This announcement does not constitute an offer to sell or the solicitation of an
offer to acquire or subscribe for New Shares and/or to take up any entitlements.
The offer to acquire New Shares pursuant to the proposed Open Offer will be made
solely on the basis of the information contained in the Prospectus to be
published in connection with the proposed Open Offer.
The information contained in this announcement is not for release, publication
or distribution to persons in the United States, Canada, Japan, the Republic of
South Africa or Australia or in any jurisdiction where to do so would breach any
applicable law.
The New Shares will not be offered for sale in, into or from the United States,
Canada, Japan, the Republic of South Africa or Australia. None of the New Shares
have been or will be registered under the US Securities Act or under the
securities laws of any state of the United States or qualified for distribution
under any of the relevant securities laws of the Republic of South Africa,
Canada or Japan nor has any prospectus in relation to the New Shares been lodged
with or registered by the Australian Securities and Investments Commission. The
New Shares are being offered and sold only outside the United States in offshore
transactions pursuant to Regulation S of the US Securities Act. The New Shares
may not be offered, sold, resold, delivered or transferred, directly or
indirectly, in or into the United States or any other Excluded Territories
absent an applicable exemption, or except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the US Securities
Act and applicable state securities laws or to any national, resident or citizen
of any other Excluded Territory.
The availability of the Placing and Open Offer to persons who are not resident
in the United Kingdom may be affected by the laws of the relevant jurisdictions
in which they are located. Persons who are not resident in the United Kingdom
should inform themselves of, and observe, any applicable requirements.
Certain statements in this announcement are forward-looking statements. Such
statements speak only as at the date of this announcement, are based on current
expectations and beliefs and, by their nature, are subject to a number of known
and unknown risks and uncertainties that could cause actual results and
performance to differ materially from any expected future results or performance
expressed or implied by the forward-looking statement. The information contained
in this announcement is subject to change without notice and (except as required
by the Listing Rules, the Disclosure Rules and Transparency Rules, the
Prospectus Rules, the London Stock Exchange or otherwise by law) neither the
Company, Citigroup Global Markets Limited, Citigroup Global Markets U.K. Equity
Limited, KBC Peel Hunt Ltd or Lloyds TSB Bank plc assume any responsibility or
obligation to update publicly or review any of the forward-looking statements
contained herein.
No statement in this announcement is intended to be a profit forecast or to
imply that the earnings of the Company for the current year or future years will
necessarily match or exceed the historical or published earnings of the Company.
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR
INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, JAPAN, THE REPUBLIC OF SOUTH
AFRICA OR AUSTRALIA OR INTO ANY JURISDICTION WHERE TO DO SO WOULD BREACH ANY
APPLICABLE LAW.
NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION IN WHOLE OR IN PART IN OR INTO THE
UNITED STATES, CANADA, JAPAN, AUSTRALIA OR THE REPUBLIC OF SOUTH AFRICA
PLACING AND OPEN OFFER OF 171,605,424 NEW SHARES AT 35 PENCE PER NEW SHARE,
STRATEGIC NEW PARTNERSHIP WITH WARNER BROS AND ARRANGEMENT OF NEW BANKING
FACILITIES
1. PROPOSED PLACING AND OPEN OFFER
SCi Entertainment Group plc ('SCi' or the 'Company') announces today that it
proposes to raise approximately £60.1 million (approximately £56.5 million net
of expenses) by the issue of 171,605,424 New Shares through the Placing and Open
Offer at the Issue Price of 35 pence each. The Issue Price represents a 37.5 per
cent. discount to the closing middle market price for an ordinary share
yesterday. 77,222,441 of these New Shares are Open Offer Shares that are being
made available to Qualifying Shareholders for subscription under the Open Offer.
94,382,983 of the New Shares are Placing Shares that have been conditionally
placed firm with institutional and other investors including 23,571,427 Placing
Shares with WB and 23,571,427 Placing Shares with the Thorson Prime Broker.
Qualifying Shareholders have the right to subscribe for their pro rata
entitlement in accordance with the terms of the Open Offer, details of which are
set out in the Company's prospectus and circular to be published today. The
Placing and Open Offer has been fully underwritten by Citigroup Global Markets
U.K. Equity Limited, KBC Peel Hunt Ltd and Lloyds TSB Bank plc.
Reasons for the Placing and Open Offer
The purpose of the Placing and Open Offer is to raise funds to provide SCi with
the working capital necessary to fund the business and activities of the Company
through the near-term and with additional funds for general corporate purposes
over the medium to long-term. The net proceeds of the Placing and Open Offer
will provide the Company with sufficient funds to develop and launch new
editions of SCi's key titles, and to repay amounts outstanding under SCi's
overdraft. SCi believes that the net proceeds of the Placing and Open Offer will
be sufficient for this purpose.
The Placing and Open Offer will raise approximately £60.1 million (approximately
£56.5 million net of expenses).
Placing and Open Offer statistics
Existing ordinary shares in issue as at the date of this
announcement 86,875,247
Open Offer Shares 77,222,441
Placing Shares 94,382,983
Enlarged Share Capital 258,480,671
Issue Price 35 pence
Percentage of the Enlarged Share Capital subject to the Placing 66.4 per cent.
and Open Offer
Gross proceeds of the Placing and Open Offer £60.1 million
Net cash of the Placing and Open Offer £50.6
million(1)
(1) Net proceeds receivable by the Company do not include the sum of
approximately £5.9 million relating to certain of the New Shares subscribed by
WB, such sum to be discharged in full by the allotment and issue of 16,985,614
New Shares to WB in satisfaction of a Group debt currently owed to WB in respect
of amounts payable under existing distribution and other commercial arrangements
between the Company and WB.
Use of proceeds
The net proceeds of the Placing and Open Offer will be used as follows:
* for the repayment and cancellation of the amount drawn on the Company's
existing £35 million overdraft facility with Lloyds TSB (£19.1 million drawn
as of 24 April 2008); and
* the remainder for working capital requirements including the development
and marketing of new releases.
Details of the Placing and Open Offer
(a) The Open Offer Shares
The Open Offer Shares represent 45 per cent. of the New Shares and will
represent approximately 29.9 per cent. of the Enlarged Share Capital. The Open
Offer Shares have been conditionally placed by the Underwriters with
institutional and other investors subject to clawback to satisfy valid
applications from Qualifying Shareholders under the Open Offer.
Qualifying Shareholders are being given the opportunity to subscribe under the
Open Offer for Open Offer Shares at the Issue Price payable in full on
application and free of expenses, pro rata to their existing shareholdings, on
the following basis:
8 Open Offer Shares for every 9 existing ordinary shares
held by them and registered in their names on the Record Date and so in
proportion to any other number of existing ordinary shares then held, rounded
down to the nearest whole number of Open Offer Shares. Fractions representing
New Shares which would otherwise have arisen will not be allotted to Qualifying
Shareholders, but will be aggregated and subscribed under the Placing for the
benefit of the Company. Accordingly, Shareholders holding fewer than 2 existing
ordinary shares will have no entitlement to subscribe under the Open Offer.
The Open Offer is not a 'rights issue'. Invitations to apply under the Open
Offer are not transferable unless to satisfy bona fide market claims. The
Application Form is not a document of title and cannot be traded. Qualifying
Shareholders should be aware that, in the Open Offer, unlike in the case of a
rights issue, any Open Offer Shares not applied for under the Open Offer will
not be sold in the market or placed for the benefit of Qualifying Shareholders,
but will be taken up under the Placing, with the proceeds retained for the
benefit of the Company.
Details of the Open Offer and the terms and conditions on which it is being
made, including the procedure for application and payment, are set out in the
Company's prospectus and circular to be published today and, where applicable,
in the Application Form. To be valid, Application Forms (duly completed) and
payment in full for the Open Offer Shares applied for, should be delivered to
the Company's registrars, Capita Registrars, Corporate Actions, at The Registry,
34 Beckenham Road, Beckenham, Kent BR3 4TU by post or (during normal business
hours only) by hand as soon as possible but in any event so as to arrive by no
later than 11 a.m. on 19 May 2008.
(b) The Placing Shares
The Placing Shares represent approximately 55 per cent. of the New Shares and
will represent approximately 36.5 per cent. of the Enlarged Share Capital. The
Placing Shares have been conditionally placed firm by the Underwriters at the
Issue Price with institutional and other investors, including WB and the Thorson
Prime Broker, conditional, inter alia, on Admission. The Placing Shares will not
be subject to clawback by Qualifying Shareholders.
Time Warner Entertainment Limited holds 8,860,897 ordinary shares, representing
10.2 per cent. of the Company's issued share capital as at 24 April 2008. It has
agreed to subscribe for up to 42,857,140 New Shares under the Placing,
consisting of 23,571,427 New Shares placed firm with it and 19,285,713 New
Shares placed with it subject to clawback under the Open Offer. The total
subscription sum payable by WB for these shares, assuming WB subscribes for such
shares in full, is £15.0 million. A portion of this subscription sum, equal to
approximately £5.9 million, or 40 per cent. of the total sum payable, will be
satisfied by the discharge of a Group debt currently owed to WB in respect of
amounts payable under existing distribution and other commercial arrangements
between the Company and WB.
Thorson holds 13,413,073 ordinary shares, representing 15.4 per cent. of the
Company's issued share capital as at 24 April 2008. It also has a long economic
interest held through contracts for differences in another 2,181,666 ordinary
shares, representing 2.5 per cent. of the Company's issued share capital as at
the same date. It has agreed to procure that the Thorson Prime Broker subscribes
for up to 42,857,140 New Shares under the Placing, consisting of 23,571,427 New
Shares placed firm with it and 19,285,713 New Shares placed with it subject to
clawback under the Open Offer. The total subscription sum payable by the Thorson
Prime Broker for these shares, assuming the Thorson Prime Broker subscribes for
such shares in full, is £15.0 million.
Both the WB Subscription Arrangements and the Thorson Subscription Arrangements
are required to be approved by Shareholders at the EGM.
(c) General
The Placing Shares and the Open Offer Shares will, when issued and fully paid,
rank pari passu in all respects with the existing ordinary shares.
The Placing and Open Offer is conditional, inter alia, on the following:
(a) the passing of certain resolutions at the EGM;
(b) the Sponsorship and Underwriting Agreement having become unconditional,
other than in relation to Admission; and
(c) Admission becoming effective on or before 8.00 a.m. on 23 May 2008 (or such
later date and/or time as the Company and the Underwriters may agree)
It is expected that Admission will become effective and that dealings in the New
Shares will commence by 8.00 a.m. on 23 May 2008. The latest time and date for
acceptance and payment in full for the Open Offer Shares is 11.00 a.m. on 19 May
2008.
Further details on the Placing and Open Offer will be set out in the prospectus
and shareholder circular to be published shortly.
2. ARRANGEMENTS WITH WB
In connection with the Placing and Open Offer the Company has entered into
certain arrangements with WB. These arrangements comprise the WB Distribution
Agreement, the WB Amendment Agreement and a commitment by WB to subscribe for
New Shares under the Placing. Together these arrangements require Shareholder
approval under the Listing Rules as they constitute a class 1 transaction, due
to the size and nature of the amount payable to WB in certain limited
circumstances on termination of the WB Distribution Agreement, and, as WB is a
substantial shareholder, a related party transaction for the purposes of chapter
10 and chapter 11 of those rules.
Time Warner Entertainment Limited holds 8,860,897 ordinary shares, representing
10.2 per cent. Of the Company's issued share capital as at 24 April 2008. It has
agreed to subscribe for up to 42,857,140 New Shares under the Placing,
consisting of 23,571,427 New Shares placed firm with it and 19,285,713 New
Shares placed with it subject to clawback under the Open Offer. The total
subscription sum payable by WB for these shares, assuming WB subscribes for such
shares in full, is £15.0 million. A portion of this subscription sum, equal to
approximately £5.9 million, or 40 per cent. Of the total sum payable, will be
satisfied by the discharge of a Group debt currently owed to WB in respect of
amounts payable under existing distribution and other commercial arrangements
between the Company and WB.
On 25 April 2008 Eidos Inc., the Company's subsidiary which carries out the
Group's publishing business in the U.S. and Canada, entered into the WB
Distribution Agreement with Warner Bros. Home Entertainment Inc. On the same
date, the Company entered into the WB Amendment Agreement and a commitment
letter agreement with Warner Bros. Entertainment Inc. Both the WB Distribution
Agreement and the WB Amendment Agreement are conditional on (i) the passing of
the relevant resolution at the EGM (ii) the completion of the WB Subscription
Commitment, and (iii) Admission
WB is a fully integrated, broad-based entertainment company and a global leader
in the creation, production, distribution, licensing and marketing of many forms
of entertainment and their related businesses. WB, a member of the Time Warner
Group, has a presence in every aspect of the entertainment industry, from
feature films to television, home video/DVD, animation, interactive
entertainment and games, and product and brand licensing.
(a) WB Distribution Agreement
Under the WB Distribution Agreement, Eidos Inc. will distribute the Group's
products in the US, Canada and Mexico through WB. Under the WB Distribution
Agreement, WB will, for an initial period of three years from the date of the
first product shipment, exclusively provide certain functions relating to the
publishing, manufacturing, marketing, sale and distribution of the Group's
products in the U.S., Canada and Mexico including:
* creative services management;
* publicity and PR functions;
* media purchasing services;
* marketing services;
* management and funding of the manufacture of the Group's products;
* sales management functions; and
* distribution services (including delivery to distribution centres, pick, pack
and ship and processing of returns).
Eidos Inc. will continue to employ its own product marketing team to work with
WB in order to ensure full brand development and support for its products.
The WB Distribution Agreement does not grant WB rights to distribute Eidos
products other than on physical formats.
In consideration for these services WB will receive a distribution fee
calculated on a sliding scale by reference to the level of aggregate annual
revenues invoiced for the products (after certain adjustments and subject to
minimum fees per unit shipped). WB will pay to Eidos Inc. a fixed advance
payment per unit shipped to its customers.
The WB Distribution Agreement will terminate if (i) Eidos Inc. files an
insolvency petition, or (ii) if any administrator, liquidator or receiver is
appointed to the business and assets (in whole or in part) of Eidos Inc., or
(iii) any creditor forecloses or enforces any of its rights under any respective
security document. In such circumstances, the Company will pay WB $10 million.
Under the WB Distribution Agreement the Company may, in the event of a change of
control of the Company, terminate the WB Distribution Agreement on six months'
written notice and the payment to WB of $2.5 million.
The Board expects the WB Distribution Agreement, by providing access to WB's
infrastructure, relationships and experience, to have a beneficial impact for
the Company in terms of growing the Group's business in these territories. The
Board expects the cost of the distribution fee under the WB Distribution
Agreement to be broadly similar to its existing distribution costs in the
territories where it is in effect but believes that the funding of marketing and
manufacturing expenses by WB reduces the Group's working capital requirements
and the replacement of fixed distribution costs with a variable distribution fee
is beneficial in that it reduces the operational gearing and risk profile of the
Company's operating results.
(b) WB Amendment Agreement
The WB Amendment Agreement regulates the relationship between the Company and WB
following Admission. It includes provisions for the appointment of a director by
WB and restrictions on an appointed director voting where there are conflicts of
interest between the Group and WB.
A detailed summary of the WB Amendment Agreement is included in the Company's
prospectus and shareholder circular to be published today.
3. ARRANGEMENTS WITH THORSON
Thorson is indirectly owned by the Tchenguiz Discretionary Trust, which is
advised by R20 Limited, the investment vehicle of Robert Tchenguiz. Thorson
holds 13,413,073 ordinary shares, representing 15.4 per cent. Of the Company's
issued share capital as at 24 April 2008. It also has a long economic interest
held through contracts for differences in another 2,181,666 ordinary shares,
representing 2.5 per cent. Of the Company's issued share capital as at the same
date. It has agreed to procure that the Thorson Prime Broker subscribes for up
to 42,857,140 New Shares under the Placing, consisting of 23,571,427 New Shares
placed firm with it and 19,285,713 New Shares placed with it subject to clawback
under the Open Offer. The total subscription sum payable by the Thorson Prime
Broker for these shares, assuming the Thorson Prime Broker subscribes for such
shares in full, is £15.0 million. Thorson has confirmed that one of its
associates, Heatherville Limited, which is also indirectly owned by the
Tchenguiz Discretionary Trust, will acquire, with effect from Admission, a long
economic interest in 42,857,140 ordinary shares pursuant to a contract for
differences entered into by it with the Thorson Prime Broker. As Thorson is a
substantial shareholder, together the Thorson Subscription Arrangements
constitute a related party transaction for the purposes of chapter 11 of the
Listing Rules and will therefore require shareholder approval at the EGM.
On 25 April 2008 the Company, Thorson and Heatherville entered into the Thorson
Relationship Agreement to regulate their relationship following Admission. The
Thorson Relationship Agreement includes provisions for the appointment of a
director by Thorson and restrictions on an appointed director voting where there
are conflicts of interest between the Group and Thorson. The Thorson
Relationship Agreement is conditional on (i) the passing of the relevant
resolution at the EGM (ii) the completion of the Thorson Subscription
Commitment, (iii) the acquisition by Heatherville of the long economic interest
in ordinary shares referred to above, and (iv) Admission.
A detailed summary of the Thorson Relationship Agreement is included in the
Company's prospectus and shareholder circular to be published today.
4. THE LLOYDS FACILITY AGREEMENT
On 25 April 2008 the Company and certain of its subsidiaries entered into the
Lloyds Facility Agreement with Lloyds, pursuant to which Lloyds agreed to
provide a £25 million revolving credit facility to SCi, Eidos Limited, Eidos and
Pivotal Games Limited as borrowers for the purpose of funding the working
capital needs of the Group. The Lloyds Revolving Facility will not be available
to be drawn until certain conditions precedent have been satisfied including the
receipt of £40 million of net proceeds from the Placing and Open Offer. If such
proceeds are not received by 27 May 2008, the Lloyds Facility Agreement will
lapse.
5. INFORMATION ON THE COMPANY
The Group develops, markets and sells interactive game software under the Eidos
label in Europe and the US. Internally developed games are created by the
Group's development studios: Crystal Dynamics, Io Interactive, Beautiful Game
Studios, Eidos Studios Hungary, Eidos Sweden; Pivotal Games; and Eidos Montreal.
The Group has a significant portfolio of intellectual property including: Tomb
Raider, Hitman, Championship Manager, Deux Ex, Kane & Lynch and Pony Friends.
Titles currently in development include Tomb Raider: Underworld and Just
Cause 2.
The Group's strategy is to create, own and exploit game franchises through
investment in high quality products.
6. CURRENT TRADING
At the start of the 2008 calendar year, the Group underwent significant changes
in three respects:
(a) Adjustment of projections for the financial year ending 30 June 2008
Whereas historically the Company has seen the majority of its revenue generated
in the second half of its financial year, with changes to the platform and
product line-up this is not expected to be the case for the 2008 financial year,
and as such, the Group announced on 10 January 2008 that the Board expected that
the Company would make an operating loss for the 2008 financial year.
(b) Management changes
On 18 January 2008 Jane Cavanagh, Bill Ennis and Rob Murphy all stepped down
from their respective positions as directors of the Company. Phil Rogers, who
joined the Group in March 2007, became chief executive officer.
(c) Business review and reassessment of working capital needs
Mr. Rogers has, with the full support of the Board, led a business review, the
conclusions of which are set out below in the paragraph entitled ''Business
review''. The outcome of this review, which was announced on 29 February 2008,
together with the adjustment of projections for the 2008 financial year referred
to above, has required the Company to reassess its working capital needs.
During the three months to 31 March 2008 the Group traded broadly in line with
the Board's expectations and the Board continues to expect that the Company will
make an operating loss in the current financial year ending 30 June 2008 During
the quarter, 2.4 million units of sales were shipped in, compared to 2.5 million
in the same quarter in the 2007 financial year.
The main new release in the quarter was Conflict: Denied Ops which has sold in
over 500,000 units in the two months since release, compared to just under
500,000 units of Battlestations: Midway sold in the same quarter last year.
Gross margin for this quarter was 48 per cent. which was in line with plan and
comparable to 46 per cent. in the third quarter of the 2007 financial year.
The cost reduction plan previously announced, to reduce operating costs by £14
million has commenced and is expected to be completed by 30 June 2008.
7. PLATFORM AND PRODUCT LINE-UP, DEVELOPMENT AND RELEASE
Following a review of its 2008 platform and product line-up, the Group decided
to move the release date of four titles into the 2009 financial year. The most
significant of these titles is the next Tomb Raider game, Tomb Raider:
Underworld, which is scheduled to launch on six platforms (PC, PlayStation 3,
Xbox 360, Nintendo DS, Nintendo Wii and PlayStation 2) simultaneously during the
Christmas season as opposed to the previously planned three platforms (PC,
PlayStation 3 and Xbox 360) in June 2008.
The Company continues to invest in its technology in order to make it as cost
effective as possible. The Group has established a worldwide asset sharing
system, which sees any one of its studios sharing elements of their technology
with other studios, thus reducing the resource of creating technology from
scratch.
The Group's new studio in Montreal is fully operational and the Company has
announced that it has begun work on Deus Ex 3, the next instalment of a
previously successful franchise. The Company has every confidence that Eidos
Montreal will play a prominent role in the future of the Group.
Io Interactive has delivered Kane & Lynch: Dead Men and is already working on a
brand new franchise along with the fifth Hitman game and a sequel to Kane &
Lynch. Crystal Dynamics will deliver Tomb Raide:r Underworld, the new adventure
for Lara Croft, for Christmas 2008 on Xbox 360, PlayStation 3, PC, Nintendo Wii,
Nintendo DS and PlayStation 2. Eidos Hungary is working on a sequel to
Battlestations Midway which will be released in the next financial year under
the name Battlestations Pacific and London-based Beautiful Game Studios is
already well into development on an entirely new Championship Manager PC title
for 2009.
The remainder of this financial year will see Eidos launch the massively
multiplayer online game (MMO) Age of Conan on PC, Top Trumps: Doctor Who on
Nintendo DS, PlayStation 2 and PC, Wacky Races: Crash and Dash on Nintendo Wii
and Nintendo DS, Looney Tunes: Cartoon Concerto, Brainbenders, Soul Bubbles and
Gauntlet on Nintendo DS and Death Jr. on Nintendo Wii.
The Company's recent adjustments to its platform and product line-up for the
remainder of the 2008 financial year are expected to benefit some of the Group's
major franchises in terms of delivering polished AAA quality games, exploiting a
more established hardware installed base and delivering within carefully
targeted retail launch windows.
8. BUSINESS REVIEW
On 29 February 2008 SCi announced a group re-structuring plan following the
business review announced on 18 January 2008. The Directors concluded that the
Group should focus its activities on its cornerstone franchises, in order to
ptimize its returns on these titles, leverage and position the Group for online
gaming and make better use of the Group's strengths. The Directors also
concluded that the Group had an inefficient operating structure and
inappropriately large infrastructure and overhead costs. The key facets of the
Group's new business plan are as follows:
(a) Fundamental change in business structure
It is intended that Sci's business structure will be significantly changed from
a centrally controlled development and publishing model to a studio-led model
focusing on building appropriate studio infrastructure around the Group's
cornerstone franchises, such as Tomb Raider, Hitman, Championship Manager and
Deus Ex. Shifting key publishing responsibilities to a studio structure is
expected to increase the Group's efficiency and focus. In future, the Group's
studios will be responsible for the development of games from initial design
through production and branding to product marketing, with the Group's
distribution division and distribution partners responsible for channel
marketing, sales and distribution.
A new business unit will also be established, branded Eidos PLAY, which will be
responsible for the growing casual games market and the Group's activities in
the mobile gaming market. Bringing these two complementary businesses together
in one unit will create a focused and effective unit.
Sci also intends to adopt a flexible and efficient approach to distribution of
its products, with an appropriate balance of direct and third party distribution
channels and partners.
(b) Product improvement initiatives
The decision to shift the Group's business structure to a studio-led model will
shift key publishing responsibilities such as brand, PR and marketing into the
studio units. This should enable the Group to form more focused teams around its
key products with the aim of not only producing high quality games, but
high-impact, focused and coordinated marketing of those games.
Sci decided to cancel 14 projects which the Board considered unlikely to
generate acceptable returns on investment or were not of appropriate quality.
(c) Cost reduction plan
The Group's operating costs have averaged 69 per cent. Of revenues over the last
30 months, compared to a peer average of 49 per cent. The Group intends to
create a lean operating structure and cost savings initiatives are underway. It
is intended to reduce the Group's headcount to 800 people, a reduction of 25 per
cent. From the Group's current level. The Board expects that annual operating
costs will be cut by £14 million by the end of June 2008.
It is also intended to move the Group's production services, which includes
quality assurance, from London to Montreal's lower cost operating environment.
9. DIVIDEND POLICY
SCi is focused on developing its franchises to drive growth and the Board does
not intend to pay a dividend for the foreseeable future.
10. INTENTIONS OF THE DIRECTORS WHO HOLD SHARES IN THE COMPANY
Tim Ryan, Nigel Wayne and Don Johnston intend to apply for their entire
respective entitlements under the Open Offer amounting to 67,837 Open Offer
Shares.
11. PROSPECTUS/CIRCULAR
A circular containing the notice convening an Extraordinary General Meeting of
the Company in connection with the Placing and Open Offer and certain other
matters, combined with a prospectus, will be sent to shareholders shortly.
12. CONTACTS
Contact:
SCi Entertainment Group Plc +44 20 8636 3000
Phil Rogers
Chris Glover
Citi +44 20 7986 4000
Matthew Smith (Investment Banking)
Charles Lytle (Corporate Broking)
KBC Peel Hunt +44 20 7418 8900
David Davies (Corporate Finance)
Madano Partnership +44 20 7593 4000
Matthew Moth / Graham Moonie
IMPORTANT NOTICE
This announcement has been issued by and is the sole responsibility of the
Company.
Citigroup Global Markets Limited, which is regulated in the United Kingdom by
the FSA, is acting as sponsor and Citigroup Global Markets U.K. Equity Limited,
which is regulated in the United Kingdom by the FSA, is acting as joint
bookrunner, joint broker and joint underwriter to the Company and no-one else in
connection with the Placing and Open Offer and will not be responsible to anyone
other than the Company for providing the protections afforded to clients of
Citigroup Global Markets Limited and Citigroup Global Markets U.K. Equity
Limited, or for providing advice in relation to the contents of this
announcement or any matters referred to herein.
KBC Peel Hunt Ltd which is regulated in the United Kingdom by the FSA, is acting
as joint bookrunner, joint broker and joint underwriter to the Company and
no-one else in connection with the Placing and Open Offer and will not be
responsible to anyone other than the Company for providing the protections
afforded to clients of KBC Peel Hunt Ltd, or for providing advice in relation to
the contents of this announcement or any matters referred to herein.
Lloyds TSB Bank plc which is regulated in the United Kingdom by the FSA, is
acting as co-lead manager and joint underwriter to the Company and no-one else
in connection with the Placing and Open Offer and will not be responsible to
anyone other than the Company for providing the protections afforded to clients
of Lloyds TSB Bank plc, or for providing advice in relation to the contents of
this announcement or any matters referred to herein.
This announcement does not constitute an offer to sell or the solicitation of an
offer to acquire or subscribe for New Shares and/or to take up any entitlements.
The offer to acquire New Shares pursuant to the proposed Open Offer will be made
solely on the basis of the information contained in the Prospectus to be
published in connection with the proposed Open Offer.
The information contained in this announcement is not for release, publication
or distribution to persons in the United States, Canada, Japan, the Republic of
South Africa or Australia or in any jurisdiction where to do so would breach any
applicable law.
The New Shares will not be offered for sale in, into or from the United States,
Canada, Japan, the Republic of South Africa or Australia. None of the New Shares
have been or will be registered under the US Securities Act or under the
securities laws of any state of the United States or qualified for distribution
under any of the relevant securities laws of the Republic of South Africa,
Canada or Japan nor has any prospectus in relation to the New Shares been lodged
with or registered by the Australian Securities and Investments Commission. The
New Shares are being offered and sold only outside the United States in offshore
transactions pursuant to Regulation S of the US Securities Act. The New Shares
may not be offered, sold, resold, delivered or transferred, directly or
indirectly, in or into the United States or any other Excluded Territories
absent an applicable exemption, or except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the US Securities
Act and applicable state securities laws or to any national, resident or citizen
of any other Excluded Territory.
The availability of the Placing and Open Offer to persons who are not resident
in the United Kingdom may be affected by the laws of the relevant jurisdictions
in which they are located. Persons who are not resident in the United Kingdom
should inform themselves of, and observe, any applicable requirements.
Certain statements in this announcement are forward-looking statements. Such
statements speak only as at the date of this announcement, are based on current
expectations and beliefs and, by their nature, are subject to a number of known
and unknown risks and uncertainties that could cause actual results and
performance to differ materially from any expected future results or performance
expressed or implied by the forward-looking statement. The information contained
in this announcement is subject to change without notice and (except as required
by the Listing Rules, the Disclosure Rules and Transparency Rules, the
Prospectus Rules, the London Stock Exchange or otherwise by law) neither the
Company, Citigroup Global Markets Limited, Citigroup Global Markets U.K. Equity
Limited, KBC Peel Hunt Ltd or Lloyds TSB Bank plc assume any responsibility or
obligation to update publicly or review any of the forward-looking statements
contained herein.
No statement in this announcement is intended to be a profit forecast or to
imply that the earnings of the Company for the current year or future years will
necessarily match or exceed the historical or published earnings of the Company.
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR
INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, JAPAN, THE REPUBLIC OF SOUTH
AFRICA OR AUSTRALIA OR INTO ANY JURISDICTION WHERE TO DO SO WOULD BREACH ANY
APPLICABLE LAW.
Appendix 1
Expected timetable of principal events
Record Date for entitlement under the Open Offer close of
business on 24
April 2008
Open Offer Entitlements credited to stock accounts of Qualifying 28 April 2008
CREST Shareholders in CREST
Recommended latest time for requesting withdrawal of Open Offer 4.30 p.m. on 12
Entitlements from CREST May 2008
Latest time for depositing Open Offer Entitlements into CREST 3.00 p.m. on 14
May 2008
Latest time and date for splitting of Application Forms (to 3.00 p.m. on 15
satisfy bona fide market claims only) May 2008
Latest time and date for receipt of completed Application Forms 11.00 a.m. on
and payment in full under the Open Offer or settlement of 19 2008
relevant CREST instruction
Latest time and date for receipt of Forms of Proxy 3.00 p.m. on 17
May 2008
Extraordinary General Meeting 11.00 a.m. on
19 May 2008
Admission and commencement of dealings in New Shares 8.00 a.m. on 23
2008
CREST members' accounts credited in respect of New Shares in 23 May 2008
uncertificated form
Despatch of definitive share certificates for New Shares in by 30 May 2008
certificated form
Appendix 2
Definitions
'Admission' the admission of the New Shares to the Official List and to
trading on the London Stock Exchange's market for listed
securities becoming effective
''Application the application form on which Qualifying non-CREST Shareholders
Form'' will be able to apply for Open Offer Shares under the Open Offer
'Board' or the directors of SCi
'Directors''Citi' Citigroup Global Markets Limited when referred to in
its
capacity as sponsor and Citigroup Global Markets U.K. Equity
Limited when referred to in its capacity as joint broker and
joint underwriter, or both where the context so requires
'Disclosure the disclosure rules and the transparency rules referred to in
Rules and section 73A of FSMA
Transparency
Rules''Eidos' Eidos Interactive Limited
''Enlarged the issued ordinary share capital of the Company immediately
Share Capital'' following Admission
''Extraordinary the extraordinary general meeting of the Company of which notice
General is to be set out in the Prospectus (expected to be convened for
Meeting'' or 11.00 a.m. on 19 May 2008)
''EGM''
'FSA' the Financial Services Authority
'FSMA' the Financial Services and Markets Act 2000
'Group' the group comprising SCi and its subsidiary undertakings
'Heatherville' Heatherville Limited
'KBC Peel Hunt' KBC Peel Hunt Ltd
''Issue Price'' 35 pence per New Share
'Listing Rules' the listing rules referred to in section 73A of FSMA
'Lloyds' Lloyds TSB Bank plc
'Lloyds the facility agreement entered into on the date of this
Facility announcement between SCi and other Group members with Lloyds TSB
Agreement' pursuant to which Lloyds TSB has agreed to provide the Lloyds
Revolving Facility
'Lloyds the £25 million revolving credit facility available to SCi and
Revolving certain other Group members as borrowers for the purpose of
Facility' funding (inter alia) the working capital needs of the Group
pursuant to the Lloyds Facility Agreement
''New Shares'' 171,605,424 ordinary shares to be issued pursuant to the Placing
and Open Offer
'Official List' the Official List maintained by the UK Listing Authority for the
purposes of Part VI of FSMA
''Open Offer'' the invitation to Qualifying Shareholders inviting them to apply
for the Open Offer Shares at the Issue Price
''Open Offer the pro rata entitlements to subscribe for Open Offer Shares
Entitlements'' allocated to Qualifying Shareholders pursuant to the Open Offer
''Open Offer 77,222,441 New Shares which are being made available to
Shares'' Qualifying Shareholders under the Open Offer
'ordinary ordinary shares of 5 pence each in the capital of SCi
shares'
''Placing'' the conditional placing by the Underwriters on behalf of the
Company pursuant to the Sponsorship and Underwriting Agreement,
of (i) the Open Offer Shares, subject to clawback to satisfy
valid applications under the Open Offer; and (ii) the Placing
Shares
''Placing 94,382,983 New Shares, which have been conditionally placed firm
Shares'' by the Underwriters on behalf of the Company pursuant to the
Sponsorship and Underwriting Agreement
'Prospectus' the Company's prospectus containing details of the Placing and
Open Offer that is expected to be to Shareholders today
'Prospectus the prospectus rules referred to in section 73A of FSMA
Rules'
''Qualifying Shareholders on the register of members of the Company at the
Shareholders'' Record Date
''Record Date'' close of business on 24 April 2008
'SCi' or SCi Entertainment Group Plc
'Company''Shareholders' registered holders of ordinary shares
''Sponsorship the conditional agreement dated the date of this announcement
and between the Company and the Underwriters relating to the Placing
Underwriting and Open Offer
Agreement ''
'Thorson' Thorson Investments Ltd
'Thorson Prime Kaupthing Singer & Friedlander Capital Markets Limited
Broker''Thorson the relationship agreement entered into between the
Company,
Relationship Thorson and Heatherville Limited on the date of this
Agreement' announcement
'Thorson the Thorson Subscription Commitment and the Thorson Relationship
Subscription Agreement
Arrangements''Thorson the proposed subscription by the Thorson Prime
Broker of up to
Subscription 42,857,140 New Shares at the Issue Price under the Placing
Commitment''Underwriters' Citigroup Global Markets U.K. Equity Limited, KBC
Peel Hunt and
Lloyds
'UK Listing the UK Listing Authority, being the FSA acting as the competent
Authority' or authority for the purposes of Part VI of FSMA
'UKLA''WB' Time Warner Entertainment Limited, in its capacity as subscriber
pursuant to the WB Subscription Commitment, Warner Bros.
Entertainment Inc, in its capacity as a party to the WB
Amendment Agreement, or Warner Bros. Home Entertainment Inc. in
its capacity as a party to the WB Distribution Agreement, in
each case as the context requires
''WB Amendment the agreement between the Company and Warner Bros. Entertainment
Agreement'' Inc on the date of this announcement which amends the terms of a
subscription agreement between the Company and WB dated 15
December 2006
''WB the binding heads of terms of an interactive services
Distribution distribution agreement between Eidos Inc. and Warner Bros. Home
Agreement'' Entertainment Inc. dated the date of this announcement
''WB the WB Subscription Commitment, the WB Distribution Agreement
Subscription and the WB Amendment Agreement
Arrangements''
''WB the proposed subscription by WB of up to 42,857,140 New Shares
Subscription at the Issue Price under the Placing
Commitment'
This information is provided by RNS
The company news service from the London Stock Exchange
END
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