Studio doubles stake in videogame publisher

In a move that could lead to its eventual purchase of the British videogame publisher, Warner Bros. has invested some $30 million to double its stake in Sci Entertainment to 20%.

As part of the deal, Warner will also start distributing and marketing all of Sci’s games, which are published under the Eidos brand, in the U.S. and Canada. Warner already provided some logistical services in the U.S. to Eidos, which is best known for the “Lara Croft: Tomb Raider” franchise.

WB’s investment is part of a larger $119 million stock placement that Sci is undertaking; the vidgame publisher has been severely short on capital in the past few months and looking for investors or to be acquired. According to reports, both NBC Universal and Warner considered buying the publisher outright.

Deal would make it very easy for Warner to buy Sci in the future, however, and quite difficult for any other company to take control without its assent. Studio apparently wasn’t willing to take control now given the publisher’s financial problems but was sufficiently convinced of its potential to invest more money and help keep it alive.

“Sci recently announced a restructuring plan which includes a new management team as well as a number of strategic and operational changes,” said Warner Home Entertainment Group topper Kevin Tsujihara, whose portfolio includes videogames. “We think the plan is a good one, and we’re impressed by the new management team, so the best option for Warner Bros is to support management’s decision and work with them to build Sci’s business.”

In a sign of how desperate Sci was for cash, the shares being bought by Warner Bros. and others represents a 37.5% discount over the publisher’s trading price on Thursday. Sci stock fell 16% to 47 pence (93¢) on London Stock Exchange on Friday as a result.

Warner’s initial 10% stake in Sci, which it bought in December 2006, cost $86.8 million.

Company plans to use the new capital to repay debt and for working capital to fund a recently downsized slate of games, which includes a “Tomb Raider” sequel coming this holiday season and new installments of its “Deus Ex,” “Kane and Lynch” and “Battlestations Midway” franchises, as well a new casual games division. Sci recently cancelled 14 titles in development and is moving its production services from London to Montreal in order to lower costs.

“The new financing puts us in a clear position to deliver on the strategic business plan which we announced in February with focus on cornerstone studios and core franchises, delivering high-quality, world class games,” Sci CEO Phil Rogers, who took over in January, said in a statement.

Sci/Eidos is now the fourth videogame publisher working with Warner’s homevid unit to distribute games, along with fellow Brits Codemasters and Empire Interactive and L.A.-based Brash Entertainment.

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