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Embracer Group Acquires Perfect World Entertainment, Shiver Entertainment And DIGIC

by Rainier on Dec. 21, 2021 @ 8:28 a.m. PST

Embracer Group, parent company of THQ and Deep Silver, is spreading the holiday cheer by going on a spending spree, acquiring Perfect World Entertainment (known for Neverwinter and Star Trek Online), Shiver Entertainment (former EA Tiburon devs) and animation studio DIGIC.

Perfect World Entertainment

Embracer Group has entered into an agreement to acquire 100% of the shares in Perfect World North America Corporation and Perfect World Publishing B.V. (collectively “Perfect World Entertainment” or “PWE”), from Perfect World Europe B.V. (“Perfect World”). PWE is a video game developer and publisher for PC and consoles, including PWE Publishing and Cryptic Studios. The acquisition adds on a total of 237 employees. The purchase price for the acquisition comprises a one-time payout of USD 125 million, divided into of USD 60 million in cash and USD 65 million in B shares of Embracer subject to consideration adjustment at closing. The purchase price net of cash amounts to USD 103 million.

Upon completion of the transaction, PWE will operate within the Embracer group as a subsidiary of Gearbox Entertainment Company, with a continued focus on publishing and creating games. PWE comprises a team of 237 full time employees, including the team behind the publishing unit. Through the acquisition of PWE, Gearbox Entertainment will onboard PWE Publishing and Cryptic Studios, which will both remain independent within Gearbox Entertainment. This acquisition will strengthen Gearbox Entertainment's Publishing division.

Founded in 2000 and headquartered in Los Gatos, California, Cryptic Studios is one of the rare handful of studios with experience launching and operating multiple MMOs (Massively Multiplayer Online Games) at scale. The studio has a track record of success with three of the last four launches achieving meaningful commercial success. Neverwinter and Star Trek Online continue to be top performing MMOs with highly engaged user bases. Cryptic comprises a team of 136 employees.

Founded in 2008 and headquartered in Redwood City, California, PWE Publishing is known for publishing leading PC and console titles based on well-known global entertainment franchises such as the Star Trek and Dungeons & Dragons games by Cryptic Studios. PWE Publishing’s product portfolio also includes the popular Torchlight series, as well as Remnant: From the Ashes, in partnership with Embracer owned development studio Gunfire Games. PWE Publishing comprises at team of 101 employees.

During 2021, PWE had operating losses stemming from the cancellation of Cryptic’s newest MMO (Magic: Legends) and a gap in PWE Publishing’s release schedule. Embracer is highly confident that under its leadership, both Cryptic and PWE Publishing will be strong financial contributors in addition to their strategic value with new IP and an MMO capability that has been missing from Embracer’s portfolio.

Cryptic Studios currently operates three longstanding MMOs (Neverwinter, Star Trek Online and Champions Online) with a shared life span of 25+ years. These titles generate significant profits, and Embracer expects the live Cryptic titles will continue to be strong and steady for the upcoming years. PWE Publishing has a compelling slate of upcoming games while continuing to evaluate new opportunities. Of the existing slate, PWE’s next launch is planned in 2022 with five additional releases by 2024. In calendar year 2021 the companies are estimated to generate net sales of approximately SEK 700 million. This includes some revenues from discontinued products at Cryptic.

Embracer Group forecasts that the transaction will contribute a breakeven operational EBIT during FY 22/23 and SEK 200-300 million during FY 23/24. These forecasts exclude any notable commercial or cost synergies.

“It's an honor for us to welcome this talented group of individuals into the Gearbox Entertainment family. Gearbox will invest into the future of Cryptic as an independent, dynamic studio that is passionate about MMOs. That commitment is paired with an exciting new partnership that will emerge as the talented Perfect World publishing team and their promising line up of future games will become supported and bolstered by the capability and strength of the Gearbox Publishing team,” said Randy Pitchford, founder of Gearbox Entertainment Company

" It has been an amazing journey being a part of Perfect World, and we thank them for all of their support throughout the years. PWE is delighted to become a part of the Embracer family, and join Gearbox on their mission to entertain the world. We are eager to apply our vast experience and talents to benefit both shareholders and customers around the world,” commented Yoon Im, CEO of PWE.

Upon completion of the transaction the board of directors will resolve to issue the shares pursuant to authorization granted by a general meeting.

Completion of the transaction is conditional upon customary conditions including regulatory merger control clearance.

DIGIC

Embracer Group, through its operative group Saber Interactive, has entered into an agreement to acquire 100 percent of the shares in Hungary based DIGIC Holdings Kft (“DIGIC”) from its current owners, including founder Alex Rabb. DIGIC is an animation studio founded by Alex Rabb and late Hollywood legend Andrew G. Vajna. Embracer adds a highly skilled team of close to 400 people through the acquisition, with a strong track record within commercial trailers and cinematics for best-selling game titles as well as animations for streaming media. The closing of the purchase is subject to various conditions including, without limitiation, approval of the transaction by lenders of DIGIC and of the Hungarian Ministry of Innovation and Technology.

“DIGIC is the best animation studio in the world - period. They have worked on more game animation products than any company in the industry and have also created incredible content for streaming partners such as Netflix. DIGIC will continue to provide creative services to our external partners as well as to internal Embracer studios across the operative groups. I have tremendous respect for Alex and I couldn’t be happier to welcome him into the Embracer family. This acquisition is precisely why I love what I do.”Said Matthew Karch, CEO of Saber.

DIGIC, based in Budapest, Hungary, is an animation studio founded in 2002, with a strong track record for creating commercial trailers and cinematics for best-selling game titles.  They also have created award-winning content for shows such as Love, Death and Robots on Netflix. The acquisition of DIGIC also includes DIGIC’s subsidiaries DIGIC Pictures Kft and DIGIC Services Kft.

DIGIC is led by founder Alex Rabb, long-time industry veteran in both the games and cinematic space. Alex worked closely with late DIGIC co-founder Andrew G. Vajna (Rambo, Terminator, Die Hard) using their experience in Hollywood to bring AAA production values to DIGIC’s operations. Alex Rabb will continue to lead the operations with a long-term commitment to the company and considerable incentive to grow. DIGIC engages close to 400 FTE’s, located in Budapest (plus an additional 40-50 freelance experts). The company has made its mark worldwide with its multi-award-winning 3D animation for the video game industry, feature films and commercials. DIGIC is best known for crafting all its work to an incredibly high-level of detail, with realistic characters and beautiful environments brought to life using world class lightning and rendering. DIGIC’s directors use epic cinematography with film industry storytelling techniques to create visuals.

The acquisition adds a talented team with a strong track record in creating AAA cinematics, trailers and concept art.  Within the Embracer Group, DIGIC will operate as a subsidiary under the Saber Interactive operating group. DIGIC will also contribute to internal projects with Gearbox, THQ Nordic, Coffee Stain and Koch Media and further strengthen Saber Interactive’s work-for-hire business.

Due to commercial reasons the specific transaction terms are not disclosed but include shares and long-term earnouts. The transaction will be accreative to adjusted earnings per share.

Founder and CEO, Alex Rabb, is committed to stay within the company. Post transaction business will remain as usual and there is no planned restructuring.

The transaction is subject to various conditions including without limitiation, approval of the transaction by lenders of DIGIC and of the Hungarian Ministry of Innovation and Technology and is estimated to be completed during the fourth quarter of Embracer’s fiscal year.

Spotfilm Networx

Embracer Group, through its wholly owned subsidiary Koch Media, has acquired 100% of the shares in Spotfilm Networx from its five current owners. Spotfilm Networx is an advertising-based Video on Demand (AVOD) channel network in Germany, located in Berlin.

Spotfilm Networx is the leading AVOD channel operator in Germany, located in Berlin, Germany. Spotfilm was founded in 2010 by Peter von Ondarza and is headed by managing director Hauk Markus. Spotfilm Networx today comprises 18 full-time employees and eight interns.

Spotfilm Networx operates 20 AVOD channels and two Subscription Video on Demand (SVOD) channels, hosting 3,000 videos on YouTube with more than 7 million Unique Visitors, and run their own streaming website Spotfilm Networx and App with more than 4 Million downlowoads.

With its channel Netzkino, Spotfilm Networx contributes one of the most popular ad-supported streaming platforms in Germany. With 4 million users and around 20 million film viewings monthly, Netzkino is already the largest feature film channel in German-speaking countries.

Spotfilm Networx will be a full operating subsidiary under the Koch Media operative group, and will continue its operations out of their current facilities.

The parties have agreed not to disclose the terms and conditions for the transaction. The transaction was signed as of 30th of November 2021 and was closed prior to this announcement.

Shiver Entertainment

Embracer Group, through its wholly owned subsidiary Saber Interactive Inc., has acquired 100% of the shares in U.S based Shiver Entertainment Inc. (“Shiver”) from its founders. Shiver is a game development studio founded by industry veterans John Schappert and Jason Andersen. Through the acquisition, Saber Interactive adds a highly skilled team of nearly 20 people, focusing on game development, co-development, and porting projects across platforms and genres.

“I can’t believe I get to finally work with Schappert and Andersen – two industry legends based in my hometown of Miami. With this acquisition we have not only brought in a great development resource, but we add significantly to Saber’s management capabilities.  John and I are ready to greatly expand our operations in North America,” says Matthew Karch, CEO of Saber.

Shiver, based in Florida with headquarters in Miami, is a game development studio founded in 2013, with focus on game development, co-development and porting projects across platforms and genres.

Shiver is led by founders John Schappert and Jason Andersen, both with significant experience from leading positions within the gaming industry. John formerly served as Chief Operating Officer of Electronic Arts and Zynga and ran Xbox Live for Microsoft. He and Jason also founded Tiburon Entertainment which eventually became EA Tiburon – one of the largest and most successful studios in the world. Shiver engages a dedicated team of 17 experienced developers, who have successfully collaborated with leading publishers on popular game projects such as Mortal Kombat. The team also has original game projects in the pipeline for release in the near future. The acquisition adds two highly-respected industry veterans to the Saber operative group, additional development capabilities and most importantly significant business development prowess.

Within Embracer group, Shiver will operate as a subsidiary under the Saber operating group. Schappert will take on significant responsibilities within Saber’s work-for-hire business. The acquisition of Shiver further strengthens Saber’s presence within the U.S.

In the calendar year 2020, Shiver generated net sales of SEK 40 million. Shiver is expected to contribute an operational EBIT of SEK 40-60 million in FY22/23 and SEK 70-90 million in FY23/24.

Due to commercial reasons the specific transaction terms are not disclosed. The transaction will be accretive to adjusted earnings.

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