Making friends.
Embracer Group has announced it is transforming into three separate, publicly listed companies, respectively named Asmodee Corp, Coffee Stain & Friends, and Middle-Earth Enterprises & Friends.
In a press release, Embracer Group explains that each of the three companies will be listed on the Nasdaq Stockholm stock exchange, with Asmodee Group and Coffee Stain & Friends being newly listed entities, while Middle Earth & Friends will “remain within the current listed company Embracer Group, which will subsequently be renamed”.
According to Embracer, the three companies have been organised to “better focus on their respective core strategies”, with each built around a different part of the holding company’s business. Asmodee Group will remain oriented around distribution and publication of tabletop games, while Coffee Stain and Friends will have a “dual focus” on indie and mid-budget PC and console games.
Middle-earth Enterprises & Friends, Embracer says, will be a “creative powerhouse” of AAA developers, with stewardship of licenses like Tomb Raider, Kingdom Come: Deliverance, and of course The Lord of the Rings. It will oversee studios like Crystal Dynamic, Eidos Montreal, Dambuster Studios, Tripwire Interactive, Flying Wild Hog, and Warhorse Studios.
In an open letter, Embracer CEO Lars Wingefors said that Embracer’s journey “has not always been a straight road” but that the ongoing transformation “is the start of a new chapter, a chapter that I intend to remain part of as an active, committed, and supportive shareholder of all three new entities.” The transition from one company to three, he claims, “reinforces Embracer’s vision of backing entrepreneurs and creators with a long-term mindset.”
It’s surprising, to say the least, to hear Wingefors discuss Embracer’s ‘long-term’ mindset considering the company’s business strategy up to now. In the space of just seven years, Embracer Group acquired over 100 game companies, all to facilitate a mysterious $2 billion dollar deal that it said “would have set a new benchmark for the gaming industry.” When that deal collapsed in what Wingefors referred to as a “rough night”, Embracer embarked upon a brutal “restructuring program”. It divested from multiple companies including Saber Interactive and Gearbox Software, laid off 1,400 people in six months, and cancelled multiple game development projects, including a new TimeSplitters and a new Deus Ex.
Consequently, Embracer has become emblematic of the dismissive, transactional way in which the games industry often treats the individual creatives without whom the whole enterprise wouldn’t exist. This may be partly why the holding group appears to be scratching out any trace of the name ‘Embracer’ from its business, and has even added the peculiar phrase “& Friends” to two of these new entities. Embracer Group? What Embracer Group? We’re Lovely Business & Pals Inc!
Moreover, how much Embracer’s business strategy has changed behind these friendlier company faces is up for debate. As part of this new chapter, Embracer has entered into a “new financing agreement” through Asmodee Group to the amount of EUR 900m. Embracer states the proceeds from these will be used to “repay existing debt and reduce leverage in the remaining Embracer Group”. In a separate press release, Embracer goes on to explain this agreement is an 18 month loan, one that is “only secured by Asmodee assets” and “ringfenced with no recourse” to the remaining parts of Embracer, that is being used to refinance its existing SEK 8 billion ($733 million) loan. In short, if the loan isn’t repaid, the debt collectors will soon enough be knocking on Asmodee’s door.
Wingefors, for his part, seems to have no intention of vacating his position as CEO despite being responsible for the whole fiasco. In his open letter, he writes “At the IPO in 2016 I made a promise to stakeholders that I would be around for at least 25 years—and I still have 17 years left to fulfill that.” I can’t help but wonder how that sounds to the people who were on the sharp end of Embracer’s restructuring program.
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