Embracer Pays $300 Million for Western Square Enix Studios Including Tomb Raider, Deus Ex, Thief, Legacy of Kain & 50 More IPs!

Residence » Information » Embracer Pays $300 Million for Western Sq. Enix Studios Together with Tomb Raider, Deus Ex, Thief, Legacy of Kain & 50 Extra IPs!

Embracer Group AB (”Embracer”) has entered into an settlement to amass the event studios Crystal Dynamics, Eidos-Montréal, Sq. Enix Montréal, and a list of IPs together with Tomb Raider, Deus Ex, Thief, Legacy of Kain and greater than 50 back-catalogue video games from Sq. Enix Holdings Co., Ltd. (“Sq. Enix Holdings”).

In whole, the acquisition contains ~1,100 workers throughout three studios and eight international areas. The full buy worth quantities to USD 300 million on a money and debt free foundation, to be paid in full at closing. Embracer has secured extra long-term debt funding commitments for this and different transactions within the pipeline. The corporate at the moment reiterates its present Operational EBIT forecast for FY 21/22, FY 22/23, and FY 23/24. The transaction is topic to varied regulatory and different exterior approvals and is anticipated to shut throughout the second quarter of Embracer’s monetary yr 22/23 (July-September 2022).

”We’re thrilled to welcome these studios into the Embracer Group. We acknowledge the implausible IP, world class artistic expertise, and monitor document of excellence which were demonstrated again and again over the previous a long time. It has been a fantastic pleasure assembly the management groups and discussing future plans for a way they’ll notice their ambitions and turn out to be a fantastic a part of Embracer,” says Lars Wingefors, Co-founder and Group CEO, Embracer Group.

”Embracer is the very best stored secret in gaming: a large, decentralized assortment of entrepreneurs whom we’re thrilled to turn out to be part of at the moment. It’s the excellent match for our ambitions: make high-quality video games, with nice individuals, sustainably, and develop our present franchises to their finest variations ever. Embracer permits us to forge new partnerships throughout all media to maximise our franchises’ potential and reside our goals of creating extraordinary leisure,” says Phil Rogers, Sq. Enix America and Europe CEO.

Webcast

Embracer held a webcast presentation for traders, analysts and media to offer extra particulars. Right here’s a timeline for the hour-long webcast…

• [00:01:30] — Lars Wingefors – CEO & Co-founder Embracer Group
• [00:08:15] — Phil Rogers – CEO Sq. Enix America & Europe
• [00:10:30] — Scott Amos – Studio Head – Crystal Dynamics
• [00:14:45] — David Anfossi – Studio Head – Eidos Montreal
• [00:20:08] — Patrick Naud – Studio Head – Sq. Enix Montreal
• [00:22:25] — Lars Wingefors – CEO & Co-founder Embracer Group
• [00:33:14] — Q&A

Background and rationale

The gathering of studios represents a world-class artistic crew of ~1,100 workers throughout three studios and eight international areas, together with two of essentially the most respected AAA studios throughout the trade in Crystal Dynamics and Eidos Montréal. The studios possess a novel capacity to ship blockbuster hits decade after decade. The acquisition brings a compelling pipeline of latest installments from beloved franchises and authentic IPs, together with a brand new Tomb Raider sport. The acquisition builds on Embracer’s mission of making a number one impartial international gaming and leisure ecosystem. Embracer has been notably impressed by the studios’ wealthy portfolio of authentic IP, housing manufacturers with confirmed international potential resembling Tomb Raider and Deus Ex, in addition to demonstrating the flexibility to create AAA video games with massive and rising fan bases. There are compelling alternatives to organically develop the studios to maximise their business alternatives.

The portfolio of IP consists of iconic franchises appreciated by critics and gamers alike. For instance, two authentic IPs, Tomb Raider and Deus Ex, have offered AAA models of ~88M and ~12M, respectively. Embracer sees a possibility to put money into these franchises, in addition to the extra acquired IPs resembling Legacy of Kain, Thief, and different authentic franchises. The acquisition additionally contains the continued gross sales and operations of the studios’ greater than 50 back-catalogue video games.

Based in 1992, Crystal Dynamics consists of virtually 300 workers throughout San Mateo, CA; Bellevue, WA; and Austin, TX. The studio is dedicated to creating narrative-focused AAA action-adventure video games and is led by 30+ yr veteran Scot Amos. Prior AAA releases from the studio embody Rise of the Tomb Raider and Legacy of Kain Defiance. Crystal Dynamics is actively engaged on a number of AAA initiatives, together with the following mainline Tomb Raider sport that can ship next-generation storytelling and gameplay experiences.

Based in 2007, Eidos Montréal consists of virtually 500[1] workers throughout Montréal, Canada; Sherbrooke, Canada; and Shanghai, China. The studio focuses on creating memorable AAA experiences targeted on distinctive tales and powerful characters inside the action-adventure and RPG genres. The studio is led by David Anfossi, who has 26 years of trade expertise. Prior AAA releases embody Thief 4, Deus Ex Human Revolution, and Shadow of the Tomb Raider. The studio is engaged on a number of AAA initiatives together with each new releases from beloved franchises and authentic IP.

Based in 2011, Sq. Enix Montréal consists of virtually 150 workers throughout Montréal, Canada and London, UK. The studio focuses on constructing cell video games that gamers will need to return to for years to return. The studio is led by Patrick Naud, who has 24 years of trade expertise. The studio is uniquely proficient in creating cell experiences primarily based on historically PC/Console IPs resembling Hitman, Tomb Raider, and Deus Ex. The studio will proceed to develop and function memorable cell video games primarily based on AAA IP.

After closing this transaction, the US will probably be Embracer’s #1 nation by variety of sport builders and Canada will probably be #2. In whole, publish pending closings, Embracer can have greater than 14,000 workers, 10,000 engaged sport builders, and 124 inner studios. Embracer’s upcoming content material pipeline contains greater than 230 video games with greater than 30 AAA video games. This acquisition will carry extra scale to Embracer’s present AAA section, and Embracer can have one of many largest pipelines of PC/Console video games content material throughout the trade, throughout all genres. As Embracer’s pipeline matures, this will probably be a key driver for natural development in internet gross sales, operational EBIT, and free money circulation.

At the moment, Embracer’s improvement assets are totally utilized both by ongoing inner improvement initiatives or by initiatives financed by exterior publishers. Embracer’s groups devoted to work-for-hire providers to exterior studios and publishers are additionally totally utilized throughout all territories. The shortage of obtainable assets within the trade and demand for these providers exceeds our obtainable capability. Via this acquisition, Embracer will increase its improvement capabilities particularly inside the AAA section, which is able to present alternatives to speed up natural development.

Embracer believes there will probably be an more and more robust demand for high-quality content material, together with AAA single-player video games, over the last decade. We intention to proceed working with main platforms and license holders and to kind deeper strategic relationships with a handful of main corporations within the trade. Moreover, synergies throughout Embracer’s ecosystem profit our individuals and firms. Our strategy is that high quality comes first in video games improvement, which is why we consider our decentralized working mannequin of empowering administration groups whereas facilitating synergies positions Embracer for sustainable long-term success.

Monetary outlook for the acquired corporations

Embracer has carried out customary due diligence as a part of our M&A execution course of each with exterior and inner groups together with a extra intensive business due diligence to completely perceive the acquired companies. We firmly consider that the studios will excel below Embracer’s working mannequin and possession.

Embracer expects important internet gross sales and operational EBIT contribution as soon as the brand new slate of AAA pipeline titles releases. Embracer’s base case monetary plan implies that the mixed acquired corporations will probably be breakeven or have a smaller Operational EBIT contribution to the upcoming two monetary years pushed primarily by gross sales of the back-catalogue titles. This might change positively if the corporate decides to enter a deeper strategic relationship with a number of platforms across the upcoming pipeline. When the product pipeline matures within the years thereafter, Embracer expects the acquired corporations to generate on common at the least SEK 500 million in operational EBIT per yr with notable upside potential. Additional particulars round financials will probably be communicated at a later stage post-closing.

Financing and present buying and selling

• Embracer has secured extra long-term debt funding commitments of SEK 4.0 billion and prolonged one present mortgage of SEK 6.0 billion with our Nordic relationship banks Nordea, SEB, and Swedbank.
• The extra financial institution funding dedication will finance our present M&A pipeline, together with at the moment’s transaction.
• With the inclusion of the brand new facility, we estimate to have greater than SEK 10.0 billion in obtainable money and credit score amenities by at the moment’s date.
• We estimate present common internet curiosity price throughout the group is anticipated to be roughly 1.0% together with the brand new facility.
• Below the brand new phrases, Embracer doesn’t maintain any short-term debt on the steadiness sheet. We would not have any debt that expires earlier than 30 June 2023.
• Embracer expects robust development in free money circulation throughout FY22/23 and the years past. We stay dedicated to delivering on our monetary leverage goal. If internet debt briefly exceeds 1.0x internet debt to operational EBIT on a ahead 12 months foundation, our intent is to return to beneath 1.0x internet debt to operational EBIT over the medium time period.
• Present buying and selling: The corporate at the moment reiterates its present forecast (final dated February 17, 2022) of operational EBIT for FY21/22, FY22/23, and FY23/24.

Buy worth

The full buy worth quantities to USD 300 million on a money and debt free foundation, to be paid in full at closing.

Completion of the transaction

The transaction is topic to varied regulatory and different exterior approvals. It’s anticipated to be accomplished throughout the second quarter of Embracer’s monetary yr 22/23 (July-September 2022).

Why Sq. Enix offered?

Sq. Enix offered Crystal Dynamics, Eidos, IPs & extra for $300 Million, as a result of they wished to put money into NFT & Blockchain.

How the deal went down?

That is a completely “correct” account of how the Embracer x Sq. Enix deal went by means of. Sure, $300 million actually is a ridiculously low-cost worth for 3 AAA studios and 50+ IPs, because the Tomb Raider IP alone can return them that funding.

Whereas after all it’s thrilling to see the event studios and full employees being saved by Embracer, who’re identified to offer their builders full funding and freedom to simply make nice video games. It’s double-exciting to know we received’t simply get extra Tomb Raider, Deus Ex and Hitman video games, however them mentioning the Thief and Legacy of Kain collection strongly hints at their returns. Yay! 😀