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THQ, which has struggled to stay afloat through a year-long cash crisis, has filed for bankruptcy protection. The company’s assets have been sold to investor Clearlake Capital Group for $60 million.
The company, which publishes console games such as WWE wrestling titles (pictured), said in a statement that the deal will allow THQ to shed “legacy obligations and emerge with the strong financial backing of a new owner with substantial experience in software and technology.” Clearlake, however, intends to serve as the “stalking horse bidder” and that will allow other parties to come forward with competing bids. Clearlake’s offer includes a new $10 million note for the company’s creditors.
To date, THQ is the biggest victim of the transition from traditional games to the new world of online, social, and mobile games. THQ once had $800 million in revenues, but it made some bad bets on such titles as the uDraw art tablets, which couldn’t compete with cheaper iPhone and iPad tablet titles.
THQ filed for Chapter 11 under the U.S. Bankruptcy code in federal court in Delaware. The company’s Canadian operations and other foreign operations are not included in the filing. THQ has also obtained financing from Wells Fargo and Clearlake that totals $37.5 million, subject to court approval.
THQ said it will continue operating its business during the sale period, based on court approval. All of the company’s four major studios will remain open, and development teams will continue to work on existing games such as Company of Heroes 2. As part of the sale, the company is seeking to assume the contracts for the studios and Clearlake will then assume control of them.
“The sale and filing are necessary next steps to complete THQ’s transformation and position the company for the future, as we remain confident in our existing pipeline of games, the strength of our studios, and THQ’s deep bench of talent,” said Brian Farrell, chairman and chief executive of THQ, in a statement. “We are grateful to our outstanding team of employees, partners, and suppliers who have worked with us through this transition. We are pleased to have attracted a strong financial partner for our business and hope to complete the sale swiftly to make the process as seamless as possible.”
Jason Rubin, who joined as president in May, said, “We have incredible, creative talent here at THQ. We look forward to partnering with experienced investors for a new start as we will continue to use our intellectual property assets to develop high-quality core games, create new franchise titles, and drive demand through both traditional and digital channels.”
THQ is asking the court to approve the transaction in 30 days. The company says consumers will see no impact from the proposed transaction and that it does not plan to cut its work force during the transition. THQ is being advised by Centerview Partners and FTI Consulting, with Gibson, Dunn & Crutcher as legal counsel.