Jan 3, 2008

A source has told Next Generation that Midway and SCi/Eidos are evaluating the possibility of a merger.

As recently as November 2007, Tomb Raider house SCi openly announced that it is entertaining offers for the company. A source within a major game publisher told Next Generation Wednesday that Chicago-based Midway is one company that is interested.

This would be the second time that the two companies were looking to merge, as Midway and Eidos parent SCi were in "very preliminary" talks three to four years ago, shortly after David Zucker came to Midway as CEO in 2003, according to the source. At the time, Midway's stock was around $20, but has since drastically slid to just $2.54 as of January 2.

Midway declined to comment on the rumor, and Eidos reps hadn't responded with a comment as of press time.

Wedbush Morgan analyst Michael Pachter, who covers Midway, said that such a merger between the two companies was "feasible," although he admitted that both companies right now are relatively weak.

"In this case, one plus one could equal a 2.2 or 2.5," he said, illustrating that a combined entity could see some modest benefit.

Pachter said that the companies' portfolios could be complementary as well. As one entity, the two firms could maximize revenues by concentrating on their known strong brands and move away from more dubious projects, he said.

Midway's brands include the Blitz football series, Mortal Kombat, Unreal Tournament and Stranglehold. SCi lays claim to big names like Hitman and Tomb Raider.

Pachter also said that Midway could benefit from SCi's European presence, and vice versa, an important upside in an industry that is increasingly global.

Courtesy of Next Generation.