Their support is enough to allow the SCi management, led by chief executive Jane Cavanagh, to meet the Eidos board today with growing confidence of blocking a rival bid for the company.
Eidos has already recommended a £71m bid by US venture capitalists Elevation Partners. But the US group, which includes U2 frontman Bono, has structured its offer as a scheme of arrangement, which means SCi can block Elevation if it can garner the support of 25% of the Eidos shareholder base.
Schroders, the largest shareholder in Eidos, has given irrevocable support to the SCi offer, representing 20% of Eidos's shares. The new shareholders will bring SCi close to breaching the 25% threshold required to shut out the Elevation bid, which requires 75% support from shareholders.
Elevation declined to comment yesterday but its offer can be restructured so that the backing of a majority of Eidos shareholders will be enough to let the deal go through. Its bid is all-cash, while SCi's is all-share, giving shareholders in Eidos a choice between a quick get-out or deciding that the SCi route offers the best way to get value out of a business that has lurched from one profit warning to another.
The meeting between SCi and Eidos executives will take place at SCi's offices in Battersea, London, this afternoon. Ms Cavanagh is expected to be accompanied by finance director Rob Murphy and sales and marketing director Bill Ennis.
Eidos representatives are expected to include chief executive Mike McGarvey and a number of non-executive directors, who will decide whether to alter the board's recommendation of the Elevation offer and back the SCi bid. John van Kuffeler, non-executive chairman of Eidos, is on holiday but will join the meeting via a telephone link.
The Eidos board members are expected to question SCi's ability to manage the acquisition of a company that has five times as many staff: Eidos employs about 700 people against the bidder's 139. SCi has earmarked savings of £14m from the deal, of which about 90% will be generated by cutting corporate costs such as an expensive Nasdaq listing. Mr McGarvey and his executive team are expected to be removed from the payroll.
Further integration issues surround the companies' differing business models. SCi outsources the development of most of its games, which include the Great Escape and the Italian Job, while Eidos employs about 400 developers directly. Critics of the Eidos business model, including SCi, have argued that in-house production has led to deadlines being missed, which has in turn led to revenue shortfalls and a sequence of profit warnings.
SCi is expected to point to the success of its own in-house development company, Pivotal Games, as the template for running Eidos's production line. Pivotal operates like an outsource partner, with its staff offered bonuses to meet production deadlines.
SCi said last week that it would raise £60m to help Eidos invest more in games development and put its designers under less pressure to rush out titles.
While SCi has a larger market value than Eidos - its shares are worth £98m in total against £86m for Eidos - it generates significantly lower revenues. SCi turnover last year was £31m, compared with £134m for Eidos. However, SCi made a pre-tax profit of £4.5m last year against a pre-tax loss of £2m at its rival.
