Title: Embracer Considers Sale of Gearbox Entertainment to Boost Finances
Date: September 11, 2022
Embracer, Europe’s largest gaming company and the maker of Tomb Raider video games, is reportedly exploring options to sell its U.S. game developer Gearbox Entertainment in order to strengthen its financial position, according to three sources familiar with the matter.
The Swedish-based Embracer is working with Goldman Sachs and Aream & Co to consider a potential sale, as the company has received interest from third parties, said two of the sources. However, both Embracer and Goldman Sachs declined to comment, while Aream did not respond to requests for comment.
The news of the potential sale had a positive impact on Embracer’s shares, which initially spiked as much as 5% higher following the announcement. As of 1030 GMT, the shares had tempered gains but were still up 2.1%.
This move comes as part of Embracer’s efforts to reduce its net debt to less than SEK 10 billion ($903 million) by the end of its financial year. In June, the company announced a restructuring plan that includes studio closures, canceled projects, and layoffs, reflecting on what CEO Lars Wingefors described as a “challenging year” for Embracer.
Embracer acquired Gearbox Entertainment in February 2021 in a deal valued at up to $1.4 billion. Gearbox is known for its popular first-person shooter game Borderlands. Marketing materials for Gearbox have already been made available to potential buyers, mainly consisting of international gaming groups, according to the sources.
While the sources cautioned that a deal may not happen, the potential sale of Gearbox could provide Embracer with an opportunity to generate additional funds and streamline its operations. Gearbox recently released its latest title, Remnant 2, which topped the U.S. charts for July.
Embracer, which owns over 900 franchises, announced a review of its business last November to navigate challenging economic conditions. This review may lead to spin-offs of other units within the company.
In May, Embracer suffered a setback when a verbal agreement with an undisclosed party, which could have resulted in over $2 billion in contracted development revenue over six years, fell apart at the last minute. This development caused Embracer’s shares to drop by more than 40%.
The gaming industry continues to experience significant growth, fueled by the increasing demand for video games and the rise of esports. Embracer’s potential sale of Gearbox reflects the company’s strategic efforts to adapt to changing market dynamics and improve its financial position.
Disclaimer: This article is based on sources that requested anonymity due to the confidential nature of the matter. The information provided is subject to change, and a deal may not ultimately occur.
Reporting by Amy-Jo Crowley; editing by Anousha Sakoui and Jason Neely