STOCKHOLM, Aug. 5, 2021 /PRNewswire/ -- Embracer Group AB
("Embracer") and its subsidiaries have as previously communicated
this morning entered into eight acquisition agreements (the
Transactions").The Transactions improve the group's capabilities
within mobile publishing and development, indie development, VR
development as well as story driven, retro shooter and other
development for PC/consoles. The acquired businesses are expected
to contribute to Embracer's net sales in the range of SEK 2,000-3,000 million and to Operational EBIT
in the range of SEK 350-550 million
during the next financial year, ending March
31, 2023. For the remaining quarters of the current
financial year ending March 31, 2022,
the run rate contribution is expected to be in the lower end of the
above-mentioned ranges. Crazy Labs is the most impactful
contributor, both in net sales and Operational EBIT, and is
estimated to be completed in the back end of the current quarter
ending September 30, 2021.
The aggregated day one purchase price for the Transactions
amounts to approximately SEK 2.7
billion in total, on a cash and debt free basis.
Approximately SEK 2.1 billion is paid
in cash and SEK 0.6 billion is paid
in newly issued Embracer B shares. To create long term alignment, a
maximum additional consideration amounting to SEK 2.0 billion on an aggregated basis, which is
subject to fulfilment of agreed milestones, both operational and
financial, over a period of up to eight years has been agreed. The
additional consideration comprises of a maximum of approximately
SEK 1.0 billion to be paid in cash
and approximately SEK 1.0 billion to
be paid in Embracer B shares. All shares are issued at a price
corresponding to the volume weighted average price per Embracer B
share at Nasdaq First North Growth Market during 20 trading days
preceding (but not including) the date of signing of each of the
Transactions. Thus, the price per share range from SEK 223.20 to SEK
231.93. The aggregated maximum consideration amounts to
SEK 4.7 billion. The estimated
surplus value that will be in the preliminary PPA amounts to
approx. SEK 4.5 billion. This will be
amortized according to Embracer's current accounting principles
straight over 5 years.
The management teams of acquired companies have ambitious
plans for profitable growth in the coming years and the earn outs
are constructed to incentivize this. For illustrative purposes, to
achieve the maximum additional consideration the acquired companies
combined must generate an aggregated Operational EBIT exceeding
SEK 6 billion plus achieving certain
operational targets by the financial year ending March 2029. To achieve the maximum consideration
milestone on year five, the acquired companies combined must exceed
SEK 1 billion in Operational EBIT for
the financial year ending March 2026
plus achieving certain operational targets.
The total number of shares that are issued as part of the
aggregate consideration, excluding shares issued as part of
earn-out structures, amounts to approximately 2,568,695 Embracer B
shares. The part of the additional consideration consisting of
Embracer B shares amounts to a maximum of approximately 4,375,488
shares provided that all earn out targets are met. In total,
approximately 6,944,183 B shares are
issued. All shares being part of the additional consideration are
issued at closing of the Transactions and subject to claw back
rights and lock-up restrictions. The share issues are made partly
pursuant to the authorization granted by the extra general meeting
held on 26 February 2021 and partly
pursuant to the extra general meeting to be held on 23 August 2021, for which a notice will be
announced separately shortly.
"I am excited to welcome more than 500 great talents across a
wide range of well established businesses that further diversify
and strengthen the group across the world from day one. Brick by
brick we continue to improve our operating groups and consequently
Embracer as a whole. We still have a strong balance sheet with a
sizable net cash position to support further M&A going forward.
We continue to have many ongoing discussions with entrepreneurs,
creators and companies to join the family, including large or
transformative companies that would create new operating groups.
I'm looking forward to continue growing the Embracer Group both
organically and in-organically the decades to come." says Lars
Wingefors, co-founder and Group CEO of Embracer.
Strategic rationale
Embracer's operating groups are continuously scouting for
companies and development teams that improve the capabilities, the
quality and the outlook for each of the operating groups. The
Transactions are improving the group's capabilities within mobile
publishing and development, indie development, VR development, as
well as story driven, retro shooter and other development for
PC/consoles. The IP portfolio is strengthened with titles like Deep
Rock Galactic for PC/console and Super Stylist for mobile. The
iconic publishing brand 3D Realms will complement the existing
publishing brands across the group.
The announced Transactions are aligned with Embracer's growth
strategy and is enabled by the group's decentralized operating
model. Over the past four years, Embracer has expanded from one to
eight operating groups. Each of these operating groups have put in
place their own M&A agenda with the purpose of adding
additional organic growth opportunities and to improve long term
profit and cash flow generation. For Embracer's decentralized
operating model to be sustainable and scalable, it is a necessity
that most acquisitions are originated and onboarded on the
operating group level. For the Embracer operating model with
emphasis on decentralized decision making and independence for
local management to work, it is also necessary that founders and
management of acquired companies join Embracer with a long-term
mindset.
Through the Transactions, Embracer grows to more than 8 000
employees and contracted employees.
Within free-to-play games, Deca
Games combined with CrazyLabs and creates a fast growing,
process oriented, data driven organization across the casual and
hyper casual segments in mobile market. CrazyLabs brings an
experienced and highly scalable publishing organization with access
to talented external studios across multiple geographies, a
significant size in terms of users and user acquisition spending
and IP's that will complement the existing portfolio of female
oriented casual titles within Deca
Games and A Thinking Ape. The new Deca operating group and
Easybrain will give Embracer a sizable, scalable and cash
generative mobile business with a solid outlook for organic growth
as well as a platform for acquisitions going forward.
Within premium games, the addition of Ghost Ship as a sister
company to Coffee Stain in Denmark
and Easy Trigger as a new internal studio in Sweden, will not only bring onboard successful
IPs and teams that Coffee Stain has a had a long-term partnership
with, but it also marks that Coffee Stain is now an indie operating
group with emphasis on continued organic growth as well as M&A.
The new Coffee Stain operating group will be home to some of the
most talented indie developers on the planet. Hopefully more indie
teams will join forces with the Coffee Stain and Ghost Ship over
the coming years and create a unique and even stronger indie eco
system.
Koch Media owned Vertigo Games is strengthening its development
capabilities within VR by acquiring the experienced team at
Forcefield. Consequently, Vertigo is more than doubling its
internal development capacity to support its ambitious growth
agenda within the VR space.
Koch Media is also adding a very experienced indie development
team in France, DigiXart, with an
strong vision for the future.
Saber is acquiring Denmark
based Slipgate Ironworks, a long term partner to Embracer that is
currently working with both Saber and THQ Nordic on different
projects. Slipgate brings a strong team with expertise in
development, co-development and porting. By deeper collaboration
with the Saber network of studios, Slipgate and its associated
publishing brand 3D Realms will be primed for profitable
growth.
Embracer is also adding capabilities to address adjacent growth
opportunities with the acquisition of B2C e-commerce and
merchandise company Grimfrost with focus on viking merchandise on a
global scale.
Strong alignment with founders and management
The Embracer operating model with emphasis on decentralized
decision making and independence for local management to work on a
day-to-day basis has been crucial to attracting some of the best
gaming entrepreneurs into the Embracer family with a long-term
mindset. Becoming part of Embracer is not an exit, but rather
considered as the next step on the journey for companies led by
founders and strong management teams.
Embracer is highly encouraged by the appetite among founders and
key management to become shareholders in Embracer, while operating
their businesses under various earnout schemes and create a strong
long-term alignment of interests. For most of the Transactions,
earnout periods range between five and eight years.
Growth centric capital allocation strategy remains
unchanged
The capital allocation priorities for Embracer are unchanged.
The first priority for allocation of operational cash flow from
released games to reinvest as much as possible into value enhancing
organic growth opportunities, e.g. new game projects. The second
priority is to use free cash flow to finance, bolt-on acquisitions
in the operating groups.
The Transactions will contribute additional free cash flow to
Embracer, while extending the range of opportunities for organic
growth investments.
Embracer reiterates the ambition to maintain a strong balance
sheet and strives to maintain a net cash position to maintain
maximum strategic flexibility. For the right inorganic growth
opportunity, financial leverage could temporarily exceed 1,0x
operational EBIT to net debt, where operational EBIT is measured as
management expectations for the coming twelve months. In such
circumstances, leverage should at least return to below 1,0x net
debt to operational EBIT over the medium term, either by retaining
cash from operations or by raising primary capital in the equity
market.
Issue of shares and dilution
Through the Transactions, Embracer in aggregate issues,
including earn-out consideration shares, a total of approximately
6,944,183 B shares, meaning that the
number of B shares in Embracer increase from 469,989,164 to
approximately 476,933,347 B shares,
and that the number of votes increase from 803,980,534 to
approximately 810,924,717.
The part of the additional consideration for the Transactions
consisting of Embracer B shares amounts to a maximum of
approximately 4,375,488 B shares
provided that all earn out targets are met. All B shares being part
of the additional consideration are issued at closing of the
Transactions and subject to claw back rights and lock-up
restrictions.
The price per share for the shares issued range from
SEK 223.20 to SEK 231.93, corresponding to the volume weighted
average price per Embracer B share at Nasdaq First North Growth
Market during 20 trading days preceding (but not including) the
date of signing of each of the Transactions.
The Transactions will, including all earn-out consideration
shares eventually earned, lead to a dilution of approximately 1.36
percent of the share capital and approximately 0.86 percent of the
votes in Embracer based on the number of shares and votes in
Embracer following completion of the Transactions and issuance of
all shares (in total 510,332,484 shares, divided between 33,399,137
A shares and 476,933,347 B shares).
The share capital will increase by SEK
19,289.40 from approximately SEK
1,398,301.06 to approximately SEK
1,399,445.49.
The shares issued as part of the consideration for the
Transactions are issued partly pursuant to the authorization
granted by the extra general meeting held on 26 February 2021 and partly pursuant to the extra
general meeting to be held on 23 August
2021, for which a notice will be announced separately
shortly.
Responsible party
This information constitutes inside information that Embracer
Group AB is obliged to make public in accordance with the (EU)
Market Abuse Regulation 596/2014. The information in this press
release has been made public through the agency of the responsible
person set out below for publication at the time stated by Embracer
Group's news distributor Cision at the publication of this press
release. The responsible person below may be contacted for further
information.
For additional information, please contact:
Lars Wingefors, Co-founder and Group CEO Embracer Group AB
Tel: +46 708 47 19 78
E-mail: lars.wingefors@embracer.com
About Embracer Group
Embracer Group is the parent company of businesses developing
and publishing PC, console and mobile games for the global games
market. The Group has an extensive catalogue of over 240 owned
franchises, such as Saints Row, Goat Simulator, Dead Island,
Darksiders, Metro, MX vs ATV, Kingdoms of Amalur, TimeSplitters,
Satisfactory, Wreckfest, Insurgency, World War Z and Borderlands,
amongst many others.
With its head office based in Karlstad, Sweden, Embracer Group has a global presence
through its eight operative groups: THQ Nordic GmbH, Koch Media
GmbH/Deep Silver, Coffee Stain AB, Amplifier Game Invest, Saber
Interactive, DECA Games, Gearbox Entertainment and Easybrain. The
Group has 77 internal game development studios and is engaging more
than 8,000 employees and contracted employees in more than 40
countries.
Embracer Group's shares are publicly listed on Nasdaq First
North Growth Market Stockholm under the ticker EMBRAC B with FNCA
Sweden AB as its Certified Adviser; info@fnca.se +46-8-528
00 399.
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For more information, please
visit: https://www.embracer.com
Webcast presentation for investors, analysts and
media
Representatives from Embracer Group and the companies will
participate in a webcast presentation today at 09.00 CET.
Invitation and details for participation will be sent out by a
separate press release
Important information
The release, announcement or distribution of this press release
may, in certain jurisdictions, be subject to restrictions. The
recipients of this press release in jurisdictions where this press
release has been published or distributed shall inform themselves
of and follow such restrictions. The recipient of this press
release is responsible for using this press release, and the
information contained herein, in accordance with applicable rules
in each jurisdiction. This press release does not constitute an
offer, or a solicitation of any offer, to buy or subscribe for any
securities in Embracer in any jurisdiction, neither from Embracer
Group nor from someone else.
This announcement does not identify or suggest, or purport to
identify or suggest, the risks (direct or indirect) that may be
associated with an investment in Embracer's shares. Any investment
decision regarding Embracer's shares must be made on the basis of
all publicly available information relating to the company and the
company's shares. The information contained in this announcement is
for background purposes only and does not purport to be full or
complete. No reliance may be placed for any purpose on the
information contained in this announcement or its accuracy or
completeness. This announcement does not constitute a
recommendation. Each investor or prospective investor should
conduct his, her or its own investigation, analysis and evaluation
of the business and data described in this announcement and
publicly available information. The price and value of securities
can go down as well as up. Past performance is not a guide to
future performance.
Forward-looking statements
This press release contains forward-looking statements that
reflect Embracer's intentions, beliefs, or current expectations
about and targets for Embracer's future results of operations,
financial condition, liquidity, performance, prospects, anticipated
growth, strategies and opportunities and the markets in which the
company operates. Forward-looking statements are statements that
are not historical facts and may be identified by words such as
"believe", "expect", "anticipate", "intend", "may", "plan",
"estimate", "will", "should", "could", "aim" or "might", or, in
each case, their negative, or similar expressions. The
forward-looking statements in this press release are based upon
various assumptions, many of which are based, in turn, upon further
assumptions. Although Embracer believes that the expectations
reflected in these forward-looking statements are reasonable, it
can give no assurances that they will materialize or prove to be
correct. Because these statements are based on assumptions or
estimates and are subject to risks and uncertainties, the actual
results or outcome could differ materially from those set out in
the forward-looking statements as a result of many factors. Such
risks, uncertainties, contingencies and other important factors
could cause actual events to differ materially from the
expectations expressed or implied in this release by such
forward-looking statements. Embracer does not guarantee that the
assumptions underlying the forward-looking statements in this press
release are free from errors and readers of this press release
should not place undue reliance on the forward-looking statements
in this press release. The information, opinions and
forward-looking statements that are expressly or implicitly
contained herein speak only as of its date and are subject to
change without notice. Neither Embracer nor anyone else undertake
to review, update, confirm or to release publicly any revisions to
any forward-looking statements to reflect events that occur or
circumstances that arise in relation to the content of this press
release, unless it is not required by law or Nasdaq First North
Growth Market's rule book for issuers.
This information was brought to you by Cision
http://news.cision.com
https://news.cision.com/embracer-group-ab/r/eight-announced-acquisitions-contribute-an-estimated-sek-2-000-3-000-million-in-net-sales-and-sek-35,c3392468
The following files are available for download:
https://mb.cision.com/Main/15049/3392468/1450891.pdf
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MA summary August
2021
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