Last checked at 2 Nov 2022 07:00
Frontier Developments plc
Acquisition of Complex Games Inc
Frontier Developments plc (AIM: FDEV, 'Frontier' or the 'Company'), a leading developer and publisher of videogames based in Cambridge, UK, announces the acquisition of experienced game development studio Complex Games Inc ('Complex'), (the 'Acquisition').
The Acquisition follows the successful collaboration between Complex and Frontier Foundry ('Foundry'), Frontier's games label for third-party publishing, on the development and publication of turn-based strategy game Warhammer 40,000: Chaos Gate - Daemonhunters, which released in May 2022 to a very positive reception and is Foundry's most successful game to date.
Founded in 2001 by Noah Decter-Jackson and Adrian Cheater, Complex has over 21 years of experience in a wide variety of game genres and platforms. The studio is based in Winnipeg, in the Canadian province of Manitoba, and employs 20 talented people, primarily developers.
Rationale for the Acquisition
The Acquisition supports Frontier's strategic objectives:
· It creates a core development footprint for Frontier in Manitoba, Canada, a region with an extensive and growing talent pool for videogame development. Frontier intends to grow the development team in Winnipeg to support future growth;
· In the near term, the closer collaboration achieved by the Acquisition will enable Complex and Frontier to even more effectively nurture Warhammer 40,000: Chaos Gate - Daemonhunters;
· In the medium to long term, the growing development team in Winnipeg will add to Frontier's game portfolio through the application of Frontier's develop, launch and nurture strategy, which will support Frontier's continued delivery of sustainable and profitable growth
Having worked closely during the development and launch of Warhammer 40,000: Chaos Gate - Daemonhunters, the Acquisition is de-risked through a deep mutual understanding and alignment of the culture, ability, and ambition of the two companies.
Financial Consideration
Frontier has acquired 100% of the shares in Complex for an upfront cash consideration of CAD$13 million (GBP£8.3 million). Conditional deferred cash consideration of up to CAD$5.16 million (GBP£3.3 million) will be payable subject to Complex meeting certain operational milestones during the period to 31 December 2023. In addition, the four employee shareholders - the two founders and the two studio principals - will participate in a 5 year profit-share cash earn-out scheme, which aligns with Frontier's strategy to develop, launch and nurture new games developed by the Winnipeg studio.
The total maximum upfront and deferred consideration of up to CAD$18.16 million (GBP£11.6 million) will be funded from Frontier's existing cash resources. Frontier's cash balances as at 31 August 2022 were £53.1 million.
The additional profit-share earn-out of up to CAD$11.76 million (GBP£7.5 million) payable over 5 years to the four employee shareholders will be funded from future cash profits generated from games developed by the Winnipeg studio.
The Acquisition is expected to deliver modest accretive financial benefits in FY23 and FY24 through a greater level of profitability for Frontier from the ongoing performance of Warhammer 40,000: Chaos Gate - Daemonhunters.
Jonny Watts, Frontier's CEO commented:
"When we launched our third-party publishing strategy in 2019 we were excited by the potential to align our Frontier Foundry development partners more formally with Frontier through acquisition. Our experience with Complex Games on Warhammer 40,000: Chaos Gate - Daemonhunters has been terrific, and I am delighted to welcome Noah and the team to Frontier, with a view to growing and evolving our development team in Manitoba, Canada. This is Frontier's first acquisition and we will continue to explore opportunities to grow Frontier's resources to further develop and nurture our portfolio."
Noah Decter-Jackson, Complex Games CEO commented:
"Working with Frontier on Warhammer 40,000: Chaos Gate - Daemonhunters has been a great experience and I am excited about our growth plans for our Winnipeg studio. I am really proud of Complex Games' achievements and I'd like to thank everyone who has been involved with that success over many years. I look forward to developing even more great games in the future as part of Frontier."
There will be a call for analysts and institutional investors at 09:30 this morning. To register please contact frontier@tulchangroup.com
The information contained within this announcement is deemed to constitute inside information as stipulated under the retained EU law version of the Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK law by virtue of the European Union (Withdrawal) Act 2018. The information is disclosed in accordance with the Company's obligations under Article 17 of the UK MAR. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
Enquiries:
Frontier Developments +44 (0)1223 394 300
Jonny Watts, CEO
Alex Bevis, CFO
Liberum - Nomad and Joint Broker +44 (0)20 3100 2000
Neil Patel / Cameron Duncan / Kate Bannatyne
Jefferies - Joint Broker +44 (0)20 7029 8000
Max Jones / William Brown
Tulchan Communications +44 (0)20 7353 4200
Matt Low / Mark Burgess / Alex Dart
About Frontier Developments plc
Frontier is a leading independent developer and publisher of videogames founded in 1994 by David Braben, co-author of the iconic Elite game. Based in Cambridge, Frontier uses its proprietary COBRA game development technology to create innovative genre-leading games, primarily for personal computers and videogame consoles. As well as self-publishing internally developed games, Frontier also publishes games developed by carefully selected partner studios under its Frontier Foundry games label.
Frontier's LEI number: 213800B9LGPWUAZ9GX18.
www.frontier.co.uk