Embracer Group Has Raised $657m Through The Private Placement

? Private Placement

• Sweden-based video game holding company Embracer Group has raised about $657m (SEK 5,782m) through the private placement of newly issued 35.7m B shares

  • The share issue indicated a strong interest from multiple institutional investors with books being oversubscribed multiple times. E.g. Canada Pension Plan Investment Board (“CPPIB”) has acquired $238.7m worth of series B newly issued shares

• The share issue will result in around 8.5% dilution in the number of shares and ~5% dilution of votes’ number

• Embracer Group has agreed to not issue additional shares for 90 days following the closure of Private Placement, with some customary exceptions

? Strategic Rationale

• With share prices and multiples trading at high range, it is one of the best time to attract money to the market

• Embracer Group reinforces financials and allows the company to continue its growth strategy by acquiring new game developers and publishers, among other assets

• Embracer Group will most probably announce a series of deals or one “huge” transaction in the next 3-6 months

? Financial Performance

• Embracer Group demonstrated an 81% increase in consolidated quarterly net sales compared to Q1 of the previous year reaching $238.5m, as well as strong improvement in EBITDA margin 47% vs 34%

• Such impressive financial performance is explained by the strong demand for video games during the COVID-19 pandemic, new releases, and acquisitions

• Investments into game development accounted for $52.6m in the accounting period with the total number of ongoing development projects reaching 125, out of which 73 projects are yet to be announced (as of the company’s last report)

? Embracer’s M&A Activity

• This September, Embracer Group acquired Dutch-based VR game developer and publisher Vertigo Games for an upfront consideration of $59m and an earn-out consideration of $77m

• This August, Embracer Group announced 8 acquisitions: Sola Media, Pow Wow Entertainment, Palindrome Interactive, Rare Earth games, Vermila Studios, Deca Games, New World Interactive, and 4A Games

• In February 2020, the company acquired PC and console game developer Saber Interactive for $150m of upfront consideration with an additional earn-out of $375m

• Among the previous acquisitions of Embracer Group are Tarsier Studios, Milestone s.r.l., Goodbye Kansas Game Invest, Gunfire Games, Piranha Bytes, Warhorse Studios, 18POINT2, Coffee Stain, Bugbear Entertainment, and Koch Media

• The company remains very active in executing new M&As raising about $185m equity capital in April 2020 and having over $585m+ in cash and unutilized credit facility in the balance sheet (as of 30 June 2020)

• Embracer Group prefers the decentralized M&A strategy, where the founders keep their own identity and get access to all benefits of Embracer’s ecosystem

? Products

• Embracer Group is a multiplatform video game holding company that owns over 190 gaming franchises, including Saints Row, Goat Simulator, Dead Island, Darksiders, Metro, MX vs ATV, Kingdom Come: Deliverance, Insurgency, World War Z and SnowRunner

• The company operates globally through its six operative groups: THQ Nordic GmbH, Koch Media GmbH/Deep Silver, Coffee Stain AB, Amplifier Game Invest, Saber Interactive, and DECA Games

• The company owns 44 internal game development studios, including Vertigo Games, and is a publisher for 55 external studious, engaging more than 4,000 employees and contracted employers in more than 40 countries

• Embracer Group has its shares publicly listed on Nasdaq First North Growth Market Stockholm under the ticker “EMBRAC B”

SOURCES: EMBRACER, THEGAMINGECONOMY, NEWS.CISION