This article is based on our Weekly News Digest #13 from 01.04.2024. If you want to receive such analyses first, subscribe to our weekly newsletter. There, we analyze the most significant deals, elaborating on the financials and strategy behind them, while also covering the smaller transactions of the week.
Sweden-based gaming holding Embracer Group (STO: EMBRAC B) has sold US-based games developer Gearbox Entertainment to US-based gaming holding Take-Two Interactive Software (NASDAQ: TTWO) for $460m, paid fully in newly issued Take-Two shares. Embracer plans to sell the shares upon closing the acquisition, which will happen no later than Jun’24.
Founded in 1999, Gearbox Entertainment is primarily known for its multiplatform FPS franchises Borderlands and Brothers in Arms. The company has also worked on titles such as Half-Life, Duke Nukem, Homeworld, and others. Notably, the Borderlands franchise is published by Australia-based 2K Games, a subsidiary of Take-Two.
In Feb’21, Gearbox formed Embracer’s seventh operating group after Embracer acquired it for up to $1.3B with $363m upfront and the rest set in potential earn-out payments over the following six years. By then, Gearbox had over 550 team members, which increased to more than 1500 employees by Q1 ’24.
Transaction Key Details
The total consideration of $460m is paid 100% in Take-Two newly issued shares, although Embracer expects $300-330m net cash proceeds following purchase price adjustments and other costs. The deal will allow Embracer to decrease its cash earnouts from $582.2m to $434.3m and reduce its share earnout obligations from 30 million B shares to 12 million B shares.
Divested companies include Gearbox Software, Gearbox Montréal, Gearbox Studio Quebec, Borderlands, and Tiny Tina’s Wonderlands franchises, and such titles as Homeworld, Risk of Rain, Brothers in Arms, and Duke Nukem.
The retained include are:
— Gearbox Publishing San Francisco (to be renamed before closing, formerly named Perfect World Entertainment), including the publishing rights to the Remnant franchise, the upcoming Hyper Light Breaker, and other unannounced games,
— Cryptic Studios, including MMO titles Neverwinter Online and Star Trek Online, Lost Boys Interactive, and Captured Dimensions.
The retained studios will be integrated into other Embracer’s operating groups.
The deal is another step in Embracer’s restructuring, described in our previous digests. The total value of divested assets is shown in the table below.
Source: Embracer Group
For Gearbox, the transaction is the continuation of a long-term partnership rather than the beginning of a new relationship. Take-Two has a nearly 20-year history of working with Gearbox, so the transition is likely to be smoother and faster than it could be with any other acquirer, especially considering that Randy Pitchford, Gearbox’s founder, and CEO, will stay in the studio along with his management team.
As for Embracer, some sources report Lars Wingefors, CEO of Embracer Group, announced the end of the restructuring program, meaning there will likely be no further divestments or acquisitions in the foreseeable future.
For Gearbox, the transaction is the continuation of a long-term partnership rather than the beginning of a new relationship. Take-Two has a nearly 20-year history of working with Gearbox, so the transition is likely to be smoother and faster than it could be with any other acquirer, especially considering that Randy Pitchford, Gearbox’s founder, and CEO, will stay in the studio along with his management team.
As for Embracer, some sources report Lars Wingefors, CEO of Embracer Group, announced the end of the restructuring program, meaning there will likely be no further divestments or acquisitions in the foreseeable future.
