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Embracer Group Divests Gearbox Entertainment For A Consideration Of USD 460 Million To Take-two Interactive

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MDCrabCakeFan86

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May 31, 2022
2,425
Baltimore, Maryland, USA
Embracer Group has just announced that Take-Two Interactive is acquiring Gearbox Entertainment for $460 million:

embracer.com

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

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...
embracer.com embracer.com

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, including our talent and our customers. I want to personally ensure fans of our games that this arrangement will ensure that the experiences we have in development at Gearbox will be the best it 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.
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5taquitos

5taquitos

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Oct 27, 2017
13,360
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I don't know if I'm happy or sad that the Remnant IP is staying with Embracer and not going to Take Two.
 
Dale Copper

Dale Copper

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Apr 12, 2018
22,678
Makes sense for 2K to buy them since they own Borderlands Publishing rights.

Also man Embracer spent over a billion to get Gearbox and don't even get half back...
 
Duxxy3

Duxxy3

Member
Oct 27, 2017
22,952
USA
Take Two is absolutely the logical landing spot for Gearbox. It's nice to see former Embracer studios ending up in good situations.
 
Shocked_Onlooker

Shocked_Onlooker

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Jun 11, 2021
522
What was Embracer's plan when buying up all those studios. Why they hoping to cash out by being bought by a big publisher or did they really think they could make it work with all that bloat?
 
Fat4all

Fat4all

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"Mrs. Rockstar Frisco... dunno, has a nice ring to it..."

yes im making the same joke in two threads i dont care
 
Broseph

Broseph

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Mar 2, 2021
5,318
Shocked_Onlooker said:
what was Embracer's plan when buyi up all those studios. Why they hoping to cash out by being bought by a big publisher or did they really think they could make it work with all that bloat?
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I think they were expecting to be bought by Saudi and have the backing of unlimited money and when that fell through, they were kinda fucked
 
Fat4all

Fat4all

Woke up, got a money tag, swears a lot
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Oct 25, 2017
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Shocked_Onlooker said:
what was Embracer's plan when buyi up all those studios.
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they had a deal in the works with Saudi Arabia that fell through, that woulda funded a buttload of games using all the IPs they bought to push their company up to a high publisher tier, sommit like a Ubisoft

but yea that didnt happen
 
JCal

JCal

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Oct 27, 2017
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Dragun

Dragun

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Oct 30, 2017
1,577
Wild how Embracer bought Gearbox for 1.3 Billion in 2021.

Now Take Two is acquiring them for 460 Million instead.
 
The_R3medy

The_R3medy

Member
Jan 22, 2018
3,133
Wisconsin
On one hand, this feels like a much better home for Gearbox than Embracer.

On the other, I'd have preferred they be independent then under yet another big game company.
 

Kratos2098

Member
Feb 18, 2022
2,336
I mean it always seemed like they should've belonged with Take Two in the first place since they funded Borderlands.
 
thediamondage

thediamondage

Member
Oct 25, 2017
12,644
Dale Copper said:
Makes sense for 2K to buy them since they own Borderlands Publishing rights.

Also man Embracer spent over a billion to get Gearbox and don't even get half back...
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a lot of their acquisitions were done with cash/stock and the stock is probably down a lot (if not nearly worthless) so they probably are doing ok. For Gearbox specifically they paid out $188m in cash up front (plus a few million Embracer shares), and had bonus payouts if certain sales targets were met over 6-10 years. Dunno what happens to those bonuses but I'd assume this deal is structured so that 2K takes them on, if any.

So yeah, not terrible for Embracer if they paid under $200m and are getting close to $500m in Take 2 stock which they can use to pay off their insane debts.

I haven't really cared about a gearbox game in ages now, thought BL3 stunk, and the movie looks bad so hopefully this gives them the financial stability to take some risks and do something new.
 
Star-Lord

Star-Lord

Member
Oct 25, 2017
7,177
I'm happy 2k is a better option for gearbox and I hope this means they can thrive for awhile and make a new brothers in arms
 
Lord Fanny

Lord Fanny

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Apr 25, 2020
28,478
Shard Shinjuku said:
How did Take 2 not end up with Gearbox in the first place?
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They weren't going to pay the price Embracer paid and if I were to guess the higher ups probably saw what most people saw and figured Embracer may go down in a massive fart and they would end up with Gearbox in the end of it all anyway. All speculation to be clear, but feels at least part of that is likely considering
 
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