10 October 2014

Keywords Studios plc ("Keywords", "the Group")

Acquisition of Lakshya Digital Pvt. Ltd

Services extension into outsourced art asset creation and operational synergies

Keywords Studios, the international technical services provider to the global video games industry, today announces the acquisition of Lakshya Digital Pvt. Ltd ("Lakshya"), a leading provider of outsourced art services for the video games industry internationally with centres of operation in New Delhi and Pune, India, for a total consideration of $4.0m.

The acquisition is in line with Keywords Studios' strategy of growing both organically and by acquisition to extend the Group's client base, market penetration or service lines, where the Group can use its existing expertise, multi-service platform, scale and global reach to generate synergies.

Founded in 2004 and employing 270 people, most of whom are highly trained artists, Lakshya is one of the most recognised brands in the large and highly fragmented market for the provision of outsourced art services to the video games industry.  It provides Keywords Studios an entry point into this fast growing market, where the demand for art assets (such as characters, vehicles, landscapes, cityscapes, space ships and weapons) is growing in line with the increase in game content as games on consoles, social media, PCs, tablets and smart phones become more complex and richer in their definition.

Under the terms of the acquisition, which is expected to be earnings enhancing in the first full year of ownership, Keywords Studios has agreed to pay the sellers of Lakshya a total of $4.0m for 100% of Lakshya, being satisfied in two tranches. 91% of the shares of Lakshya have been acquired for $3.0m in cash.  The remaining 9% will be acquired for a total of $1.0m in October 2015, of which up to $400,000 at sole discretion of Keywords will be used to subscribe for shares in Keywords Studios at a price determined by the volume weighted average price per share in the 5 days prior to completion of this second stage. Two of the sellers will each be granted options over 450,000 shares of Keywords at the prevailing market price.   

Lakshya's audited accounts for the year to 31 March 2014 show it achieved revenues of INR 249m ($4.05m); it had net assets of INR 78m ($1.3m) including net debt of INR 9.1m ($0.15m). Underlying PBT after adjusting for a non-continuing activity amounted to INR 23m ($0.37m).

Lakshya's well-established position with game development studios, particularly in the US and Japan, will open up new sales channels for the Keywords group where the focus is primarily on video game publishers. The business development team of Lakshya will be integrated into the Keywords sales force to further facilitate cross selling between the Group's extended range of services.

Andrew Day, Chief Executive of Keywords Studios, commented:

"By providing us with an entry point into the large, growing yet fragmented art outsourcing market, the acquisition of Lakshya provides Keywords with additional growth opportunities as well as cost and revenue synergies.  It  will enable the Group to have earlier involvement in the development cycle of video games titles, it will enable us to share one facility at Gurgaon (New Delhi) where both Lakshya and Babel Media are located and it will provide us with a base from which to expand further in the art outsourcing market."

"We look forward to welcoming Lakshya's highly talented employees to the fast growing Keywords group and to continuing to build upon its strong brand, leveraging Keywords' unparalleled geographic footprint, client relationships and financial strength. Amalgamating Keywords and Lakshya business development resources will further strengthen the breadth of our offering, while ensuring that we take full advantage of opportunities to introduce all clients to the full range of services available from Keywords studios around the world."

For further information, please contact:

About Keywords Studios (www.keywordsstudios.com)

Keywords Studios is an international technical services provider to the global video games industry.  Established in 1998, and with facilities in Dublin, Montreal, Seattle, Los Angeles, Tokyo, Singapore, New Delhi, Rome, Milan and London. It provides integrated localisation, testing and audio services across 40 languages and 12 games platforms to a blue chip client base in more than 15 countries. It enjoys a leading market position, providing services to 21 of the top 25 most prominent games companies listed by Gartner¹, including Microsoft, Namco Bandai, Konami, Sony, Electronic Arts and Square Enix. Key recent titles it has worked on include  NBA 2K15, Middle-earth: Shadow of Mordor, Forza Horizon 2, Diablo III: Reaper of Souls Ultimate Evil Edition, Clash of Clans and Minecraft. Keywords is listed on AIM, the London Stock Exchange regulated market (KWS.L). For further information, please visit: www.keywordsstudios.com.

About Lakshya Digital (www.lakshyadigital.com)

Lakshya is a leading provider of art services including concept art, modelling, texturing and animation to the video games industry. Working from two, well-appointed studios in Gurgaon (New Delhi) and Pune, Lakshysa's highly talented artists use industry leading tools to produce the finest quality art assets for incorporation in many leading video game titles including WWE 2K14, Kinect Sports Rivals, Metal Gear Solid V: Ground Zeroes, Epic Mickey 2: The Power of Two, Unchartered2: Among Thieves and DC Universe Online. Lakshya's proprietary "SWAT" workflow management tool enables it to track and share progress of its projects with its clients from conception to completion.

¹Source: Gartner, Market Trends: Gaming Ecosystem Goes Mobile with New Monetization Models, 21 November 2012