Ouch! Embracer Group is in the midst of a restructuring period that is resulting in the divestment of several video game studios, resulting in layoffs and game cancellations. Less than two weeks ago, the holding company shuttered Saints Row developer Volition to reduce operating costs. Now it has brought another well-known game developer onto the scene.
Embracer Group wants to divest itself of one of its more valuable studios, Gearbox. Reuters notes that there may already be several interested Buyer. While the company did not name any names, investment banks Goldman Sachs and Aream are supporting the negotiations.
Hug shaft jumped Following Monday’s news, the price closed up five percent at 27.40 Swedish krona (SEK). The modest increase is dwarfed by the meteoric fall from SEK 52.40 to SEK 20.99 in May. The sharp decline is due to a $2 billion investment by Saudi Arabia’s Savvy Games Group, which fizzled out. Embracer needed the cash injection to recoup funds spent on a studio buying spree in 2021 and 2022.
Embracer acquired Gearbox in February 2021 along with Aspyr, Easybrain and Springboard VR for around $1.4 billion. Between May and October 2021, the company acquired an additional 18 studios, including 3D Realms. Then in December, it bought three holding companies consisting of 31 studios and four independent developers, including Perfect World Entertainment, for more than $3 billion.
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In 2022, the company continued to provide money to numerous studios and IPs. By April, six more developers had been added to its roster. Then, in May 2022, the company participated in a Square Enix yard sale, where it purchased Cyrstal Dynamics, Eidos-Montreal and Square Enix Montreal for $300 million.
At this point, Embracer was already feeling the burning hole in his wallet and started discussions with Savvy Games save it for $1 billion. Savvy responded to the deal and Embracer continued to buy studios throughout 2022. Eventually, the company tried to get Savvy to double its investment, after which the Saudi company backed out. To put the financial problems into perspective, consider that Embracer shares sold for SEK 130 before the IPO – a drop of 79 percent.
Now the company is struggling to keep its business running and has launched a restructuring plan that will put it back in the black – or at least close to it. Of course, as with any restructuring, there are losses. Lost jobs and projects postponed indefinitely or canceled are just a few casualties. With the liquidation of Embracer, the will has now completely disappeared.
Selling Gearbox could potentially eliminate a large chunk of Embracer’s debt. The company wants to divest and cut costs enough to recoup $605 million by the end of fiscal 2023. However, there will still be a long way to go. Current outstanding debt is over $1.5 billion.