Keywords Studios to buy VMC in largest acquisition to date

Keywords Studios has agreed to buy VMC, a North American provider of video game functional testing and customer support, from Volt for a cash consideration of around $66.4m.

The group intends to fund the consideration and working capital adjustments and related transaction costs through a fully underwritten cash placing of approximately £75m of new ordinary shares.

Keywords said the deal has “a compelling strategic and financial rationale”. It noted that VMC had adjusted revenue of $57.4m and adjusted EBITDA of $6.4m on an annualised basis in the year to October 2017.

It said the deal will increase its market share and footprint, growing functional testing and more than doubling the size of its customer support offering in the key North American market. In addition, it will add a business of scale with “a reputation for a high quality service and a strong, blue chip client base”.

The deal, which is expected to significantly earnings-enhancing in the first full year, is due to complete on or around 30 October 2017.7

Chief executive Andrew Day said: "We're thrilled to announce the acquisition of VMC which, as our largest acquisition to date, represents an important milestone in our strategy to selectively consolidate the fragmented video games market and generate synergies through scale in certain services and geographies.

"VMC is an organisation we've admired for several years for its reputation, scale and high quality service as well as its attractive embedded technical services and crowd-based testing services.

"With secure testing labs in Seattle and Montreal, very close to Keywords own studios, we expect to be able to leverage the strengths of both organisations while achieving significant cost synergies to deliver profit performance similar to that of the rest of the group.

At 1300 BST, the shares were up 3.3% to 1,433p.