Embracer sells off Gearbox to Take-Two for $460 million

A good few months after a sale was first reported to be on the table, Embracer has now confirmed the sale of Gearbox Entertainment to Take-Two Interactive for $460 million. This brings Gearbox in house with long term publishing partner 2K Games, who still had publishing rights to the Borderlands franchise, even with the developer under Embracer’s ownership.

In the sale, Take-Two will acquire the main development side of Gearbox – the main studio in Texas, alongside Montreal and Quebec – and will fully acquire the Borderlands franchise, as well as Homeworld, Risk of Rain, Brothers in Arms and Duke Nukem. Embracer will hold onto the publishing arm (which is to be rebranded) and the various IPs that they had assigned to the brand over the last few years, including Remnant and Hyper Light Breaker. They are also retaining Cryptic Studios, Lost Boys Interactive and Captured Dimensions.

While $460 million will go a long way to help clearing Embracer’s accumulated debt, and the sale in general will help to reduce the company’s wage bill, it’s a markedly lower number than the $1.3 billion that Gearbox was bought for. However, it’s not as simple as that. The initial acquisition saw a day one price of $363 million, of which $175 million was in Embracer shares, and with the total price intended to grow to $1.3 billion over the course of six years, if Gearbox met performance targets. Embracer is also able to effectively offload a large chunk of that original purchase through this sale – the net debt will reduce by around $300 million, while cash earnout obligations are reducing by approximately $150 million. Gearbox clearly earnt a good chunk of their value, then.

Speaking of which, this is not a cash buy out by Take Two, but is instead 100% funded by newly issued shares in the company. Embracer could theoretically hold onto these until GTA 6 lands, but given their financial difficulties, they intend to sell them shortly after this deal is closed.

“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.

Source: Embracer