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Borderlands maker Gearbox Entertainment said the Embracer Group is acquiring the triple-A game studio for up to $1.3 billion.
The Frisco, Texas-based Gearbox will become a wholly owned subsidiary of the Karlstad, Sweden-based company. The transaction gives Gearbox access to new capital to help it make more games and become a significant part of the Embracer Group, which has 5,500 employees around the world.
Now it is adding Gearbox’s team of 550 in Frisco, Texas, and Quebec City, Canada, to its roster. Gearbox will become Embracer Group’s seventh operating group. Embracer Group made headlines in November when its buying spree surged; the company announced it had acquired 12 game studios and a PR firm in a single day. And at the same time that Embracer Group announced the Gearbox deal, it also said it was buying Easybrain, a mobile game maker in Cyprus, for $640 million.
Over the years, Gearbox has worked on the Borderlands and Brothers in Arms franchises, and it helped with the development of Half-Life, Counter-Strike, Tony Hawk’s Pro Skater, 007 James Bond, and Halo.
“[CEO Lars Wingefors’] vision of Embracer as an allied partner group committed to fueling and accelerating the ambitions of a series of decentralized, successful entrepreneurial companies while magnifying the collective value and advantages of diversification across the entire group is the most brilliant strategy and design for short, medium, and long-term success in this industry that I have ever encountered in my 30 years in this industry,” said Gearbox founder Randy Pitchford in a statement. “The feeling at Gearbox is that we are just getting started and this transaction is not merely a stimulant for the talent of our employee-owned company, but a propellent for the exciting future we have planned.”
The Gearbox team has developed and engaged a plan for immediate and long-term growth that includes the expansion of talent at both studios, the creation of new Gearbox studios, and expanded partnerships. This merger enables Gearbox to do more with its existing brands, create new ones, and, potentially, undertake the merger and acquisition of other successful industry and industry-adjacent entities and properties.
“Gearbox is arguably one of the most creative and valuable independent developers in the world,” said Lars Wingefors, founder and CEO of Embracer Group, in a statement. “We believe that the resources offered by Embracer will position Gearbox for significant growth in the years to come.”
Gearbox confirmed that Pitchford will continue in his current role as head of the studio he started in 1999. Juno Capital Partners and Union Square Advisors acted as M&A and financial advisers to Gearbox on this transaction, and Fenwick & West acted as legal counsel.
Embracer Group is the parent company of game businesses with a catalog of over 200 owned franchises, such as Saints Row, Goat Simulator, Dead Island, Darksiders, Metro, MX vs ATV, Kingdoms of Amalur, TimeSplitters, Satisfactory, Wreckfest, Insurgency, and World War Z.
Embracer Group’s other groups include THQ Nordic GmbH, Koch Media GmbH/Deep Silver, Coffee Stain AB, Amplifier Game Invest, Saber Interactive, and Deca Games. Embracer Group has 57 internal game development studios in 40 countries.
Embracer said that Gearbox generated $123 million in sales for the nine months ended September 30. For the full calendar year of 2019, Gearbox generated sales of $125.2 million and operational earnings before interest and taxes of $37.7 million.
Under the deal, Embracer will pay $188 million in cash and $175 million in newly issued Embracer B shares. If Gearbox hits targets for operations in the next six years, it will also get a maximum of $1.01 billion. Of that amount, $360 million will be issued in Embracer B shares and the remaining $655 million will be in cash.
Gearbox’s portfolio includes Borderlands, Brothers in Arms, Homeworld, and Duke Nukem. The Borderlands franchise currently has three blockbuster installments, and the franchise has sold more than 60 million copies to date. The Brother in Arms series has sold more than 10 million copies to date. Gearbox Software, the game development unit, has developed more than 20 game titles over almost two decades with hundreds of millions units sold combined.
Gearbox Publishing, the publishing unit, has published indie titles such as Hello Neighbor (2017), We Happy Few (2018), Risk of Rain 2 (2019) and Godfall (2020).
In a statement, a spokesperson for Borderlands publisher 2K said, “As the proud publisher of the Borderlands franchise, we are happy for our partners at Gearbox and this exciting new chapter for their organization. The merger does not change 2K’s relationship with Gearbox nor our role as the publisher for the Borderlands IP or any other projects we are currently working on with the studio. We look forward to continuing our long-term partnership with this incredibly talented team and delivering many more exciting entertainment experiences to gaming fans around the world.”
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