SCi Entertainment, the games company that brought the world Lara Croft, is raising £60m in a rights issue that could see Time Warner and property billionaire Robert Tchenguiz add another £15m each to their already significant investments in the company. Both investors could also take seats on the board.
Mr Tchenguiz's investment vehicle, Thorson, already owns 15.4 per cent of SCi and has the option of buying an additional 42.9 million shares under the terms of the share issue. Time Warner owns 10.2 per cent. Around £5.9m-worth of its enlarged stake's £15m price tag will be satisfied by the discharge of a debt, and a beefed up distribution deal with Warner Brothers Entertainment will give SCi products extra marketing muscle in the US, Canada and Mexico.
SCi's rights issue follows a tough year. Three profits warnings in quick succession last autumn – which the company blamed on tough market conditions and sharper than anticipated price cuts for its PS2 and PS3 games – saw the share price plummet from 524p to 45p. In January, Jane Cav-anagh, the chief executive, stepped down in the face of investor pressure after the announcement of interim losses of £83.4m.
Phil Rogers, who had been appointed as finance director in September, took over the top job, launching a strategic review which culminated in a restructuring plan published in February that acknowledged a £45m shortfall in working capital. SCi said it had decided to scrap development on 14 new games.
Yesterday, however, Mr Rogers said he believed the company was close to turning the corner. "This investment is the next phase in showing how we are going to turn the company around," he said. "We are now fully funded and I have been pleased at the level of confidence both internally and externally."
The company added that current trading was in line with expectations and that it is on track to deliver cost savings of £14m by June, at a cost of £7m, from the rationalisation programme.
Lara Croft's next outing – Tomb Raider: Underworld – will now go on sale at Christmas on all platforms simultaneously, rather than the staggered release that had originally been planned.
Despite the positive spin from the company, shares in SCi fell another 16 per cent to 47p yesterday, with investors unnerved at the heavy discounting of the new share offer. The stock was offered at 35p, a 37.5 per cent discount to Thursday's closing price, with 55 per cent of the issue already allocated to institutional investors. The remainder will now be offered to qualifying existing shareholders on the basis of eight new shares for every nine held.