The Rise and Fall of Embracer (aka THQ Nordic)

[911 Jumper]

 

[Morgoth]

 

[-M-]

$500M to dump the guy* that ruined Id?

Sounds like a bargain.

*Willits

 

[Alienman]

Nice money injection boost.

 

[scytheavatar]

$500M to dump the guy* that ruined Id?

Sounds like a bargain.

*Willits

John Carmack does not work for Saber Interactive.

 

[duskvile]

Embracer should revamp Thief and Deus Ex franchise.

 

[Infinitron]

https://kotaku.com/borderlands-4-gearbox-embracer-acquisition-1851297286

Sources: Borderlands Studio Will Escape The Most Divisive Company In Gaming​

Gearbox is leaving the Embracer fallout behind as devs wait for a answers on what’s next​

Embracer bought Borderlands maker Gearbox Entertainment for $1.3 billion back in early 2021 amid an unprecedented acquisition spree that’s since turned into a financial disaster. Now, just three years later, Kotaku has learned that Gearbox is closer than ever to being sold out from under what is arguably the most hated company in gaming.

Gearbox CEO and co-founder Randy Pitchford held a town hall with staff earlier this week in which he told employees that a decision had been made regarding the studio’s future, with more information to be shared next month, according to two sources familiar with the meeting. For months now Pitchford has told developers at Gearbox that there were three possible scenarios: stay with Embracer, sell to someone else, or finance a buyout and go back to being independently run. Kotaku understands that the decision was made to sell, and a deal is in the late stages of being finalized.

Embracer did not immediately respond to a request for comment. Pitchford sent Kotaku the following statement:

I’m delighted that what we might be up to is interesting enough to people that you want to make a story about us for your readers. I’m honored and humbled that our company is a topic of rumor, speculation, and discussion. As always, we will be thrilled to share whenever we have projects to announce or news to share as we work hard towards our mission to entertain the world.

Rumors of a sale first began swirling last September after Reuters reported that Embracer was weighing whether to sell the crown jewel in its crumbling studio empire following the loss of a reported $2 billion in financing. That money was supposed to come from a Saudi-backed game investment fund, according to a report by Axios. Without the extra capital, Embracer imposed a brutal cost-cutting regime on many of its recently acquired studios which resulted in layoffs as well as entire closures.

“There are many options under consideration, including Gearbox’s transfer, taking Gearbox independent, and others,” Gearbox chief communications officer Dan Hewitt told staff in an email obtained by Bloomberg in September after the Reuters story first broke. “Ultimately, we’ll move ahead with whichever path is best for both Gearbox and Embracer.”

The email highlighted a sense of uncertainty that’s cast a shadow over the 25-year-old Texas-based studio since Embracer first revealed its plans for draconian cuts across its global network of subsidiaries in May 2023, sources say. Pitchford promised internally that those cuts wouldn’t result in substantial layoffs at Gearbox at the time, but dozens of people were ultimately let go across recruiting, HR, and other operations roles throughout the year, according to five current and former employees. Those who weren’t impacted by targeted layoffs still had to grapple with freezes on pay raises and hiring.

Image: Gearbox Entertainment / 2K

“I’ve personally been looking for roles elsewhere not just due to the Embracer layoff fears, but due to pay,” said one current developer who wished to remain anonymous because they were not authorized to speak to the press. “Vague and in a holding pattern is definitely par for the course at the moment and has been for most of 2023.”

Gearbox rapidly expanded in an unwieldy way following the Embracer acquisition, becoming a home for additional studios and publishing operations. Embracer acquired Perfect World Entertainment in 2021 and reformed it as part of Gearbox Publishing. Gearbox acquired co-developer Lost Boys Interactive in 2022. And later that same year, Embracer announced that Volition, the 30-year-old studio behind the Saints Row reboot, would be folded under the Gearbox umbrella as well. These same parts of the business have also been ravaged by cuts, including members of the publishing team that helped launch Remnant II, staff at Cryptic which makes the online RPG Neverwinter, and Volition, which was unceremoniously closed by Embracer in the middle of last year.

2023 also saw a creative shakeup within Gearbox. Following the Embracer budget shortfalls, the studio shelved work on some exciting new projects and IPs to focus primarily on the next Borderlands games which are published by 2K, according to two sources familiar with the changes. A follow-up to Borderlands 3 underwent a reshuffling of some of its leadership team as Gearbox tries to get it across the finish line, while a sequel to Tiny Tina’s Wonderlands underwent a soft reboot. Sources tell Kotaku that both projects are still very promising and progressing well, but that the upheaval contributed to feelings of uncertainty on the studio floor. “We’ve lost senior people because of this,” claimed another developer.

So far, 2024 has been a historically bad year for cuts and layoffs across the video game industry, with even the biggest players like Microsoft, Sony, and Electronic Arts, whether due to necessity or cynical opportunism, canceling projects and laying off hundreds of developers. A few developers Kotaku spoke with say this mood hasn’t been helped by the studio’s leadership. Despite monthly meetings with Pitchford, they say there hasn’t been any real clarity on when hiring, pay increases, and promotions might return to normal, or what a future Gearbox might look like under a new ownership regime. “If I were in their shoes my number one priority would be making everyone feel safe,” said one current developer.

But even in the current hellscape, Embracer is viewed as one of the more pernicious parasites. It grew fat on low-interest financing and a post-pandemic market frenzy that allowed it to snatch up big-name studios and IPs, only to leave them all without a safety net when the big risky bets didn’t magically metastasize into a business plan. Embracer CEO Lars Wingefors recently called the current layoffs across his company and beyond merely “something that everyone needs to get through.”

Developers at Gearbox are hoping they can “get through” it without the Swedish holding company hanging like an albatross around its neck. “The thing a lot of us are hoping for is being bought from Embracer and allowed to keep doing what we’re doing or getting back to where we were before project-wise due to more and better funding,” one current developer said. Gearbox won’t be the only major acquisition Embracer unloads. Bloomberg reported that Saber Interactive, currently in charge of a remake of Star Wars: Knights of the Old Republic, will be sold for $500 million.

 

[pOcHa]

the rats leaving the sinking ship first as always

 

[Cologno]

$500M to dump the guy* that ruined Id?

Sounds like a bargain.

*Willits

John Carmack does not work for Saber Interactive.

Nor did he ruin id.

 

[REhorror]

Is this the end of European gaming industry?

 

[Zed Duke of Banville]

Is this the end of European gaming industry?

This is the end of the Swedish gaming industry.

 

[RobotSquirrel]

Is this the end of European gaming industry?

Its ok! We still have CDProjekt Re... Oh now I made myself sad.

Gearbox's decision makes sense, they really don't need Embracer problem is Randy is an idiot so I fully expect him to pick the worst fucking option for a buyer.

Best case Scenario 3D Realms takes out a stupid loan to do the funniest joke the games industry has ever seen.

 

[BlackAdderBG]

Is Haemimont the future?

 

[Baron Dupek]

They found Timesplitters 4 on eBay and made it playable
only took Ł525
https://www.pcgamer.com/games/fps/p...red-on-ebay-and-is-now-playable/#comment-jump

 

[Morgoth]

Embattled publisher Embracer sells off Saber assets, withdraws from Russia​

Buyer founded by Saber boss.


News by Tom Phillips Editor-in-Chief
Published on 14 Mar 2024

Troubled video game publisher Embracer has announced the sale of more of its assets - this time, large portions of Saber Interactive, for the price of $247m.

In a financial call this morning, Embracer said the sale means it will cease all operations in Russia, something that will help it "reduce [its] geopolitical risk" - though the buyer, a company named Beacon Interactive, is founded by Saber Interactive co-founder Matthew Karch.

Karch will now lead Saber's studios separately from Embracer, though said he would remain "a large, long-term shareholder of Embracer" who will continue to partner with the company on "several ongoing and future projects".

In terms of actual studios, the deal will see Embracer sell off all Saber Interactive-branded studios, plus New World Interactive, Nimble Giant Entertainment, 3D Realms, Slipgate Ironworks, Mad Head Games, Fractured Byte and Sandbox Strategies.

Embracer will retain Aspyr, TripWire, Beamdog, Tuxedo Labs, Demiurge, Shiver, Snapshot Games and 34 Big Things.

The sale will reduce Embracer's debt by 2.1bn Swedish kroner, or around £160m.

After a huge acquisition spree, Embracer has subsequently shed thousands of staff and numerous development studios over the past year as it struggles to balance the books - it says, after a major investment fell through.

More to follow.

 

[SlamDunk]

This is what one gets when dealing with Arabs.

The lesson here for Embracer and everyone else is to never trust a Muslim.

 

[Häyhä]

This is what one gets when dealing with Arabs.

The lesson here for Embracer and everyone else is to never trust a Muslim.

That's just bullshit venture capitalism at it's finest. Buy a shit-ton of companies with loan money, not to produce anything long-term, but just to dump them on someone else for fast money. The Saudi towelheads were just too smart to buy into Embracer's BS in the end. Good riddance.

 

[karoliner]

https://embracer.com/releases/embra...million-to-take-two-interactive-software-inc/

Embracer Group divests Gearbox Entertainment for a consideration of USD 460 million to Take-Two Interactive Software, Inc.​

INSIDE INFORMATION: Embracer Group has today entered into an agreement to divest Gearbox Entertainment, for a consideration of USD 460 million (SEK 4.9 billion) to Take-Two Interactive Software, Inc. (“Take-Two”). The proceeds from the deal will, upon closing, significantly reduce net debt, earnout obligations and capex. Embracer retains selected companies, including Gearbox Publishing San Francisco (to be renamed), with the publishing rights to the Remnant franchise, the upcoming Hyper Light Breaker and other notable unannounced game releases.
“Today’s announcement marks the result of the final structured divestment process and is an important step in transforming Embracer into the future with notably lower net debt and improved free cash flow. Through the transaction, we lower business risk and improve profitability as we transition to becoming a leaner and more focused company. After evaluating several options for Gearbox, I am happy that we have reached a solution that is in the best interest of all stakeholders. Randy and the team have been great team members throughout the past years, and I would like to thank them all for that. As one of the world’s greatest games developers, I am confident that Gearbox will continue to innovate and thrive in their new home within Take-Two,” says Lars Wingefors, co-founder and CEO of Embracer.
”As a significant long-term Embracer Group shareholder, I believe in the strategy for the Embracer Group going forward and am completely convinced that this transaction is the best possible scenario and an obvious net positive arrangement for Embracer Group, for Take-Two and, of course, for Gearbox Entertainment. My primary interest is always Gearbox, especially our talent and our customers. I want to personally assure fans of our games that this arrangement will ensure that the experiences we have in development at Gearbox will be the best they can possibly be,” says Randy Pitchford, founder and CEO of Gearbox Entertainment.
Transaction key components

• The purchase price on a cash and debt free basis and assuming a normalized level of working capital amounts to USD 460 million (SEK 4.9 billion) and will be subject to adjustments by customary purchase price mechanics.
• The consideration at closing will be paid 100% in newly issued Take-Two shares. The number of Take-Two shares will be calculated by dividing the purchase price by the volume weighted average closing price per share on the Nasdaq Global Select Market during the five trading day period ending on the trading day immediately prior to the closing date. Embracer’s intent is to sell these shares to receive cash proceeds soon after closing. Closing is expected in Q1 FY 24/25, ending June 2024.
• Following purchase price adjustments, transaction costs, share sell-down and earnout settlements (including earnouts earned and due to be previously paid in Q1 FY 24/25) the expected net cash proceeds amount to approximately USD 300-330 million (SEK 3.2-3.5 billion).
• Cash earnouts in accordance with non-GAAP will be reduced by SEK 1.6 billion compared to the group total of SEK 6.3 billion as of Q3 FY 2023/24 and of a total maximum of approximately 30 million B shares in share earnout obligations approximately 18 million B shares will be reduced. In connection with closing, the remaining approximately 12 million B shares will still be issued as settlement of certain earnout obligations.
• The divested assets include:
  • Gearbox Software (Frisco, Texas)
  • Gearbox Montréal
  • Gearbox Studio Quebec
  • Borderlands and Tiny Tina’s Wonderlands franchises, as well as Homeworld, Risk of Rain, Brothers in Arms and Duke Nukem
• The retained assets include:
  • Gearbox Publishing San Francisco (to be renamed prior to closing, formerly named Perfect World Entertainment), including the publishing rights to the Remnant franchise, the upcoming Hyper Light Breaker and other notable unannounced game releases
  • Cryptic Studios, including MMO titles Neverwinter Online and Star Trek Online.
  • Lost Boys Interactive
  • Captured Dimensions
• The retained companies will be welcomed and integrated into other parts of Embracer Group in the coming period. All companies are expected to contribute with a positive cash flow going forward.

Embracer financial impact

• Net debt will be reduced by approximately SEK 3.2-3.5 billion in connection with closing.
• Cash earnout obligations will be reduced by approximately SEK 1.6 billion. The combined reduction of net debt and cash earnout obligations is approximately SEK 4.8-5.1 billion.
• Capex will at closing be reduced by approximately SEK 0.8 billion, based on the annualized Q3 FY 23/24 run-rate.
• The transaction is expected to be immediately accretive to free cash flow generation.
• If closing would have occurred on 31 December 2023, the transaction is estimated to have created a non-cash net expense of approximately SEK 1.0-1.3 billion.

Illustrative financials for the period 1 January – 31 December 2023 (before any potential effects from the ongoing restructuring program after 31 December 2023):

SEK, million	Divested assets	Retained assets*	Divested assets % of group	Retained assets % of group	Group total, incl. divested assets
Net sales[1]	1,680	2,011	3.9%	4.7%	42,687
Adjusted EBIT	-30	197	-0.5%	3.0%	6,552
EBITDAC[2]	-809	-117	-26.8%	-3.9%	3,024
Capex	-941	-508	12.1%	6.5%	-7,803
# total headcount[3]	1,336	760	8.8%	5.0%	15,218
Book value of ongoing game development projects	990	580	10.2%	6.0%	9,728

Closing of the transaction
Closing of the transaction is expected to take place in Q1 FY 2024/25 and is conditional upon customary conditions including regulatory approvals such as merger control clearance.
Investor presentation
Embracer Group will hold a webcast presentation for investors, analysts, media and other stakeholders on 28 March at 09.00 CET. Please find more information in a separate distributed invitation that will follow this release.
Advisors
Goldman Sachs Bank Europe SE Sweden Bankfilial and Juno Capital Partners are acting as joint financial advisers and Fenwick is acting as legal counsel to Embracer Group in the transaction. Ernst & Young has provided services for financials and tax.
For more information, please contact:
Oscar Erixon, Head of Investor Relations Embracer Group AB (publ)
Tel: + 46 730 24 91 42
Email: oscar.erixon@embracer.com
Arman Teimouri, Head of External Relations Embracer Group AB (publ)
Tel: +46 793 33 05 60
E-mail: arman.teimouri@embracer.com
About Embracer Group
Embracer Group is a global Group of creative and entrepreneurial businesses in PC, console, mobile and board games and other related media. The Group has an extensive catalog of over 900 owned or controlled franchises. With its head office based in Karlstad, Sweden, Embracer Group has a global presence through its twelve operative groups: THQ Nordic, PLAION, Coffee Stain, Amplifier Game Invest, Saber Interactive, DECA Games, Gearbox Entertainment, Easybrain, Asmodee, Dark Horse, Freemode and Crystal Dynamics – Eidos. The Group has 132 internal game development studios and is engaging more than 15,000 employees in more than 40 countries.
Embracer Group’s shares are publicly listed on Nasdaq Stockholm under the ticker EMBRAC B.
Subscribe to press releases and financial information: https://embracer.com/investors/subscription/
[1] Net sales includes intercompany transactions within Embracer.
[2] EBITDAC = Adjusted EBITDA less Gross investment in intangible and tangible assets.
[3] Total headcount includes externally funded game developers, internal game developers, internal employees, and non-development, as of December 31, 2023. –
This information is information that Embracer Group AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation 596/2014. The information was submitted for publication, through the agency of the contact persons set out above, at 2024-03-28 04:25 CET. The persons above may also be contacted for further information.

Embracer Group divests Gearbox Entertainment for a consideration of USD 460 million to Take-Two Interactive Software, Inc.

 

[Morgoth]

Randy wins again.

 

[Infinitron]

Randy wins again.

They published Borderlands. He probably could have sold to them years ago, I'm sure there were offers on the table. I wonder for how much.

 

[Infinitron]

https://www.rockpapershotgun.com/em...ts-too-early-to-start-acquiring-studios-again

Embracer say their restructure is over, but it's "too early" to start acquiring studios again​

Earlier today, megacorp Embracer announced they were selling Borderlands developer Gearbox to Take-Two. During an investor call about the divestment, CEO Lars Wingefors confirmed that this brought an end to the restructuring process Embracer announced last year. He was also asked whether this meant Embracer had plans to start acquiring other studios again.

Wingefors said it was "way too early" to restart "the M&A engines."

"We are ending the restructuring programme now, end of March, and the Gearbox restructuring process has been part of that programme. Now we are getting approached, I would say not quite daily, but on a weekly basis, by companies that would like to acquire certain assets within the group. And I’ve been very clear that they’re not for sale, because they’re a very important part for the group and for the shareholders of the group going forward," said Wingefors.

The companies that Embracer have chosen to sell had "negative cashflow", he said, and divesting from those businesses would make the Embracer that remains more "cashflow generative."

This doesn't mean that it's time to resume the group's previous strategy of hoovering up other companies, however.

"Looking to do more [mergers and acquisitions] deals – I think it’s way too early to start talking about restarting the M&A engines again," said Wingefors. "Now we are in the late phases of the consideration into the future of the group, and that’s our highest focus and priority – how we set up ourselves and structure ourselves, and utilise our assets we have within the group, and have them work together, and how we leverage them better working together, utilising different functions, I think that’s our focus right now, to increase profitability and cashflow generation, by simply making better products and games."

As of early 2023, Embracer owned 138 studios, including Gearbox, Crystal Dynamics, Eidos Montreal, Volition, Piranha Bytes, Ghost Ship Games, 3D Realms, 4A Games, Flying Wild Hog, Saber Interactive, Perfect World, Tuxedo Labs, Coffee Stain, Dambuster Studios, New World Interactive, Warhorse Studio and more. Most had been acquired in the past five years.

During the last twelve months, developer and publishing group Saber Interactive were split into a separate company, taking 3D Realms and 4A Studios with them; TimeSplitters developer Free Radical were closed; Saints Row developer Volition were closed; and 8% of Embracer's employees were laid off.

So hey, it's good news that they're not currently planning to restart the mergers-and-acquisitions engine, aka the creativity shredder, aka the human misery harvester, aka the C-suite fidget spinner. Maybe someone should hide their keys in case they change their mind.

 

[Zed Duke of Banville]

Meaning Embracer is still too deeply indebted, relative to its core profitability, to make more acquisitions. Let's hope it goes under entirely, though only after selling Warhorse.

 

[Alienman]

What people seem to forget and what makes the hate exceptionally retarded here, on Reddit and Twitter, is that they revived the AA market. They have released many games over the years that wouldn't see daylight otherwise - Jagged Alliance 3 included.

 

[Infinitron]

There's some truth to that, but Jagged Alliance 3 is actually an example of Embracer not following their usual strategy since they did not acquire the studio that developed it.

 

[BlackAdderBG]

What people seem to forget and what makes the hate exceptionally retarded here, on Reddit and Twitter, is that they revived the AA market. They have released many games over the years that wouldn't see daylight otherwise - Jagged Alliance 3 included.

They revived shit. Heamimont pretty much went shopping for publisher, as always, for a failed past project as I heard, so THQ Nordic took the bait and slapped the JA license on it. What other games had THQ Nordic revived the last 5 years? ELEX ? What about Deep Silver, did you like the revival of Saints Row?