Carlyle explores £1bn sale of UK video games maker Jagex

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Private equity group Carlyle has hired advisers to explore a sale of its UK video games developer Jagex, which could be worth more than £1bn.

Jagex, which is best known for the long-running RuneScape franchise, is working with bankers at Morgan Stanley and boutique advisory Aream & Co, according to people familiar with the process. The Cambridge-based developer could fetch more than £1bn in a sale, these people added.

Discussions are at an early stage and the sale process could run from the end of this year until the first half of 2024, the people cautioned.

The company had previously been seen as a candidate for a UK initial public offering. Several London-listed video games developers, including Codemasters and Sumo Digital, have disappeared from the UK public markets in recent years following foreign takeovers.

Founded in 2001, Jagex has passed through several owners before Carlyle acquired the company two years ago for an undisclosed sum. Almost 300mn people have played RuneScape — a multiplayer online game set in a medieval fantasy world — over the past two decades, Jagex says.

The last owner before Carlyle was the asset manager Macarthur Fortune Holding, which paid $530mn to buy Jagex in 2020 from Shanghai Hongtou Network Technology.

In its latest filings to Companies House, Jagex reported annual revenues in 2021 that rose 4 per cent to £125mn. However, profit slipped slightly that year to £37mn due to one-off costs attributable to the company’s sale.

M&A volumes in the global gaming sector have risen since the onset of the Covid-19 pandemic in 2020 as the number of gamers boomed. New policies such as Apple’s privacy push have also enhanced the value of scale for advertising purposes, even though the global games market declined overall last year.

Earlier this year the Saudi wealth fund-owned Savvy Games Group acquired US-based games developer Scopely for $4.9bn in the kingdom’s latest gaming investment.

At the same time, private equity groups are under pressure to exit investments and generate cash for their institutional backers at a time when the UK faces a slowdown in public listings.

Deals between private equity groups in Europe have plunged to their lowest levels since the pandemic as the buyout game of pass-the-parcel is hit by rising debt costs and investors’ concerns about the economic outlook.

In the first three months of this year, the value of deals struck between rival private equity groups in Europe fell to its lowest point since the second quarter of 2020, according to data provider PitchBook, as buyout houses seeking to exit investments struggled to agree on prices.

Representatives for Carlyle, Morgan Stanley and Aream declined to comment.