Lara Croft could fall into new hands after SCi Entertainment, her owner, admitted that it had held “extremely preliminary discussions” over a possible takeover of the computer games publisher.

The name of SCi’s suitor was not given, although speculation focused on Ubisoft, of France, the maker of Tom Clancy’s Splinter Cell. Time Warner, a 10 per cent shareholder, is not thought to be interested, having passed up the opportunity to take a larger position previously.

SCi shares rose 13 per cent to 384p, valuing the company at £332 million, on confirmation of rumours of an approach that had started circulating in the market on Monday. The stock, prone to sharp swings as sentiment changes, rose 15 per cent that day as speculation intensified.

Crucial to any takeover will be the attitude of Robert Tchenguiz, the entrepreneur best-known for his property investments, who holds 22 per cent of SCi through a mixture of direct and indirect investments. Mr Tchenguiz is understood not to be involved in a bid and is thought unlikely to take any action until SCi’s board determines its response to the approach.

The timing of a move on SCi is opportunistic and comes after a profit warning, when the developer of the Tomb Raider games admitted that it would make an £18 million provision because it had misjudged the impact of migration from second-generation games consoles to third-generation consoles.

That sent the shares plunging, reducing SCi’s shares to levels not seen for three years, as investors worried about the ability of its management to handle the awkward transition to the next generation of consoles and about whether the business model was suitable for the public market.

Vivendi, which owns World of Warcraft in its fast-growing games division, and Electronic Arts, the world’s biggest computer games publisher, were also named as potential suitors. Midway Games, the American firm controlled by Sumner Redstone, whose Viacom-owned Paramount makes the Lara Croft films, has also looked at SCi previously. All declined to comment yesterday.

SCi is Britain’s only large independent publisher and developer of games and is behind games such as Championship Manager, Hitman and Kane & Lynch. Lara Croft came into its hands after SCi’s management, led by Jane Cavanagh, pulled off the acquisition of the larger Eidos, home to the cyber heroine, back in 2005.

Initially, SCi restored credibility to the battered Eidos operation, which repeatedly had missed shipment deadlines and nearly destroyed the value of the Lara Croft franchise with the unplayable Angel of Darkness. The Tomb Raider series is still one of the bestselling video game franchises, with more than 32 million copies sold, but it took the release of Tomb Raider Anniversary this year to show that Lara was back. A million copies had already been sold by the end of SCi’s financial year in June.

However, SCi adopted a conservative approach to migration to next-generation consoles, which has left it under unexpected pressure. The company decided to concentrate on PlayStation 2 games while waiting for the PlayStation 3’s install base to build up. Not only did this prove to be a misjudgment - because the retail price of PS2 games collapsed – but the company focused its next-generation effort on the PS3, which in turn has struggled to meet sales forecasts, largely because of the unexpected success of Nintendo’s Wii product.

Neverthless, despite the difficulties, analysts expect a recovery once the next-generation console cycle settles down. Kane & Lynch: Dead Men, a shooter based on the adventures of a mercenary and psychopath, has received good reviews and will appear on the PlayStation 3 shortly.

A Hitman movie is due in October, which should help to boost the brand’s value, and Tomb Raider Anniversary is expected to generate a further million sales this financial year.

SCi has flirted with several suitors in the past two years. However, those talks came to an end after it became clear that no one was willing to pay the price that management wanted. SCi settled instead for an alliance with Time Warner, in which the American group took a 10 per cent stake, and SCi won the rights to develop games related to Warner Brothers films.

Counting

SCi’s top sellers in year to June 2007
Just Cause 1.1m
Tomb Raider: Anniversary 1.0m
Battlestations: Midway 0.5m

Total games sold:
11.9m

Forecast results for year to June 2007
(Figures due to be reported at end of the month)
Turnover: £166m
Operating profit: £8.3m
Exceptional charges: £18m
Loss before tax: £8.7m

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