New Square cash â??hard to not see as buyout moneyâ??

New Square cash â??hard to not see as buyout moneyâ??

By Rob Crossley

January 19th 2010 at 3:53PM

Games analyst weighs in on rumours that Square Enix is set to acquire

Revelations that Square-Enix this week raised nearly $400 million has left analysts confident that the Tokyo-headquartered group is ready to buy out another rival.

Screen Digest games analyst Ed Barton has told Develop that the money – issued in zero-coupon convertible bonds – is not likely going to be used solely to pay off debt.

“It’s hard to see them not using this money for acquisitions,” he said, “when they’ve raised that much cash, already with about $880 million kicking around, it’s difficult to see this as rainy-day money.”

Barton adds that the timing of Square’s move is telling.

“Square is raising debt at an opportune moment; corporate debt is currently relatively cheap,” he said. “If it has any requirements for additional capital in the next five years now looks a good time to raise it.”

In announcing the move to its investors (pdf here), Square-Enix said that the money will be used to pay off existing debt, as the firm owes around $555 million up to 2015.

Yet Barton adds that, with the company already holding as much as $880 million in its war-chest, Square may be at the beginning stages of another studio acquisition.

“Either Square has a target in mind or it wants serious ammunition for any opportunistic situations which might arise,” he said.

Last year Square purchased Eidos for £84.3 million, boosting the firm’s variety and appeal of owned IP.

Barton ponders whether Square-Enix will follow in EA’s footsteps, with an escalating number of publishers embracing social game studios.

“For an Asian publishing powerhouse, Square has relatively little involvement with browser-based games and games playable over social networks. Yoichi Wada confirmed in December that he has a studio looking into these types of games however an acquisition could accelerate this process dramatically.”