SCi Drops Most in 18 Years After Takeover Talks End (Update2)

Jan. 11 (Bloomberg) -- SCi Entertainment Group Plc, the maker of the ``Tomb Raider'' video game, fell the most in more than 18 years in London trading after ending takeover talks with potential suitors and saying it will post a loss in 2008.

SCi tumbled as much as 82.5 pence, or 61 percent, to 52 pence, and traded at 67.5 pence at 11:16 a.m. The decline cut the London-based company's market value to 65.1 million pounds ($127.2 million).

``Management credibility is rock bottom, given heavy use of questionable provisions, failure to achieve release targets, at a time when the market is booming,'' Simon Davies, an analyst at ABN Amro Holding NV, said in a note to investors today. ABN has a ``hold'' rating on the stock.

Ubisoft Entertainment SA made an initial approach last year before ruling itself out in October. The London-based Times reported on Sept. 24 that SCi had received two takeover approaches from Time Warner Inc. and an unidentified Chinese company.

The board ``no longer believes that a sale of the company for the full value is likely to be achieved,'' SCi said yesterday in a statement after markets closed.

Forecast

SCi also said it will post an operating loss in 2008 because of delays to the release of four titles, which include the next Tomb Raider. It now plans to introduce the games in the first half of 2009 and may need additional working capital to maintain operations. SCi has identified the sources of the funds if needed, it said.

``By delaying the release of four titles, they have delayed cash inflow, so to develop new games they've needed to find some more,'' Rob Brent, an analyst at KBC Peel Hunt Plc in London said by telephone. He believes the figure that may be required to be ``in the region of 30 million pounds.'' KBC do not have a rating on the stock and are SCi's house broker.

SCi acquired the Tomb Raider series of games with the purchase of the unprofitable Eidos Plc for 104 million pounds in stock in April 2005.

SCi's net loss was 28.1 million pounds for the 12 months ended June 30, including a charge for credits to retailers. That compared with net income of 13.4 million pounds a year earlier, SCi said Sept. 27. Sales fell 20 percent to 144 million pounds. The stock has lost 86 percent in the past 12 months.

``I definitely think it is more of a target now,'' Brent said. ``Something may happen in the near term as there is clear value in the assets, and it is very cheap right now. New bidders may be interested, while the prior parties may also still want to get involved.''

Calls seeking comment from senior management at SCi were not immediately returned.

To contact the reporter on this story: Tim Barwell in London on tbarwell@bloomberg.net

To contact the editor responsible for this story: Malcolm Fried on mfried@bloomberg.net