by
William D’Angelo
, posted 8 hours ago / 703 Views

Following a recent report that Embracer Group was selling one its largest subsidiaries, Saber Interactive, Embracer Group has confirmed the sale. 

Embracer Group will also cease all operations in Russia, which was part of a previous board decision. The company will also improve cash flow.

Embracer Group is selling Saber Interactive to Beacon Interactive, a company controlled by Saber Interactive co-founder Matthew Karch, for $247 million.

A letter from Saber Interactive CEO Matt Karch sent to employees obtained by Bloomberg’s Jason Schreier revealed Saber Interactive will bring along 4A Games and Zen Studios through options that brings the total purchase price to around $500 million.

“Today, through a company we formed called Beacon Interactive, we have agreed to buy back the rights to Saber (and all of its worldwide studios and exclusive contractor relationships), Mad Head, DIGIC, Nimble Giant, Fractured Byte, Slipgate, 3D Realms, New World Interactive, SPL, Stuntworks, Bytex, 4A and Zen (through options), totaling over 3,000 developers across the world,” reads the letter.

We have decided precisely on these studios for acquisition because we believe they represent the best of what Saber is and can be. This group comprises some of the most talented and creative developers in the world. Our track record and more importantly the projects we have in development speak volumes about our capabilities. I truly believe that we currently have the best collection of game developers in the industry thanks to all of you.”

“I am pleased that we have found a win-win solution for Embracer and the parts of Saber that now will leave us,” said Embracer Group co-founder and CEO Lars Wingefors. “This transaction puts both companies in a stronger position to thrive going forward. Embracer is now able to discontinue all operations in Russia, according to a previous board decision, while safeguarding many developer jobs under new independent ownership.

“At the same time, we keep key companies, valuable IPs and future publishing rights. Cash flow is immediately improved, and we remain committed to reducing net debt. The transaction yields additional headroom to amortize debt in accordance with existing bank agreements and will improve financial flexibility. This is the first transaction of the previously mentioned structured processes and marks a small but important step in our journey to transform Embracer into the future for the benefit of all employees, gamers, and shareholders.”

Saber Interactive co-founder and Beacon Interactive director Mtathew Karch added, “Over the past four years, I have been proud to be part of Embracer’s amazing transformation into one of the leading game companies in the world. As part of the company’s efforts to reorganize for a changed industry and geopolitical challenges, we jointly felt it was the right decision for both Embracer and the core of Saber to part ways.

“This divestment leaves both parties in much better positions to grow our respective businesses. I will continue to remain a large, long-term shareholder of Embracer and we will remain partners on several ongoing and future projects. This transaction also safeguards the livelihoods of hundreds of professionals, many of whom I have worked with for over two decades.”

Read the key components to the transaction below:

• The purchase price of USD 247 million (SEK 2,527 million[1]) comprises:

  • USD 203 million (SEK 2,077 million) which is paid with promissory notes to be repaid in cash no later than December 31, 2024. During a period starting June 2024 until September 2024 promissory notes amounting to a total of USD 65 million (SEK 665 million) will be repaid as part-payments and the remainder will be paid in full at maturity. The promissory notes will carry an interest per annum of 10 percent that will start to accrue as of October 1, 2024 up until December 31, 2024 for any amount outstanding under the promissory notes; and
  • Absorbed earn-out debt obligations in accordance with IFRS of USD 44 million (SEK 450 million).

• Furthermore, Embracer will be entitled to an additional consideration of up to USD 94 million (SEK 962 million) if the Buyer resells the assets for a higher consideration subject to certain conditions and time periods.
• The Buyer also assumes and forgoes notable current and future performance bonuses and other management compensation relating to the Saber Interactive transaction dated February 2020.
• The Buyer is granted an option right to acquire 4A Games and Zen Studios for a fixed price within a certain time period. Due to commercial reasons the parties have agreed not to disclose full terms. The Board of Embracer is, however, confident that the exercise price stipulated in the option right reflects at least the studios’ market value and is significantly higher than the current net book value (including goodwill) of USD 81 million (SEK 829 million). In addition to paying the exercise price the Buyer will, if exercising the option right, assume additional earnout liabilities of approximately USD 31 million (SEK 317 million). Long-term license and publishing rights to all current and future PC/console games in the Metro franchise are held within the Embracer operative group PLAION. These rights will not change regardless of whether the option rights are exercised. During the past 12 months, 4A Games and Zen had net sales of SEK 191 million, Adjusted EBIT of SEK 65 million and EBITDAC[2] of SEK 19 million.
• The divested assets include 38 ongoing game development projects, amounting to a book value of around SEK 2.3 billion. The divested assets also include certain proprietary engine technology and game tools relating to the divested companies.
• The retained pipeline includes 14 games to a book value of around SEK 0.5 billion. The retained projects, including two joint projects with the Buyer, include:

  • The next AAA game from 4A Games
  • An unannounced concept phase AAA game
  • A previously announced AAA game based on a major license
  • A new AAA multiplayer shooter based on a controlled IP
  • A new AA game based on an Asmodee IP
  • A new AA game from 34 Big Things based on an owned IP
  • Killing Floor 3
  • Teardown (ongoing development)
  • The full upcoming pipeline and back catalog from Zen Studios, Aspyr and Tripwire

A life-long and avid gamer, William D’Angelo was first introduced to VGChartz in 2007. After years of supporting the site, he was brought on in 2010 as a junior analyst, working his way up to lead analyst in 2012 and taking over the hardware estimates in 2017. He has expanded his involvement in the gaming community by producing content on his own YouTube channel and Twitch channel. You can contact the author on Twitter @TrunksWD.

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