SCi dampens Bono's efforts to acquire Eidos

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The Independent Online

Plans by Bono, the U2 singer, to be part of a team that will acquire Eidos, the Lara Croft games publisher, as part of a £71m recommended cash offer, suffered a major set back yesterday when rival publisher, SCi Entertainment, launched a counter bid worth £76.1m.

Plans by Bono, the U2 singer, to be part of a team that will acquire Eidos, the Lara Croft games publisher, as part of a £71m recommended cash offer, suffered a major set back yesterday when rival publisher, SCi Entertainment, launched a counter bid worth £76.1m.

Shares in Eidos finished trading 28 per cent higher at 57.5p with traders anticipating a drawn-out auction for Eidos.

SCi's intervention, backed by Schroders, Eidos's biggest shareholder with 20 per cent, sparked a war of words between the two management teams. Eidos, led by its chief executive, Mike McGarvey, expressed scepticism at SCi's ability to handle a large, international operation and raised questions about the future value of an all-share offer made at a four-year high for SCi shares.

But SCi's stock ended the day 3.73 per cent higher, reflecting confidence in the City that the company behind the highly successful Conflict series of computer games would succeed in its bid, creating an enlarged quoted games publisher.

SCi is planning to raise a further £60.1m to invest in the Eidos titles and repair the company's finances, which recently prompted Eidos to warn that it would have to start a fire sale of assets if a bid was not forthcoming. Jane Cavanagh, SCi's chief executive, said: "The Eidos management really don't see the potential of that company."

SCi also attacked what it claimed was a bloated cost base at Eidos, including excessive management salaries. It said: "In its last financial year Eidos's administrative expenses were £22.2m, representing 16.5 per cent of turnover. In contrast SCi's administrative expenses were £3.2m, representing 10.3 per cent of turnover. For example, the costs of executive management, being a public company with a Nasdaq listing, represent a substantial portion of Eidos's overhead base."

Eidos said it was not rejecting out of hand the SCi offer and would consider it alongside the cash offer from Elevation Partners, the US private equity fund backed by Bono and John Riccitiello, the former president of Electronic Arts, one of the world's leading computer games companies.

Mr McGarvey said the Eidos board would have to weigh up the certainty of Elevation's cash offer with the share-based proposal from SCi, taking into account doubts over SCi's management experience of running an international company.

Rob Murphy, SCi's finance director, said: "About 70 per cent of our turnover arises overseas. We sell to 60 countries. We have had number one titles across Europe and America and we are operating international businesses profitably. Eidos have been good at opening offices everywhere but increasing overheads doesn't give you expertise."

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