(Stockholm) End clap for the gluttonous Swedish video game giant Embracer: financially weakened by its frenzy of acquisitions, the owner of the successful franchise tomb Raider will split into three pieces to regain favor with investors.
Board games, limited budget video games, the most famous flagship franchises: each of these three activities will live its life separately by 2025, Embracer announced on Monday.
“The boom of the 2020s is over, it was a different world. We must adapt to a new environment” in which “capital is limited,” recognized the group’s founder and first shareholder, Lars Wingefors, presenting his plan.
Through its acquisitions made at a time of abundant and low-cost financing, the Swedish group found itself at the head of activities as varied as the board game publisher Asmodée (Ticket To Ride/Rail Adventurer, 7 Wonders…), rights derived from the work of J. R. R Tolkien or video games Tomb Raider (Lara Croft) And Deus Ex.
But Embracer’s model, leaving each activity a lot of room to maneuver, ended up tiring investors worried about the accumulated debt. The value of Embracer shares has thus been divided by six since its peak in May 2021.
A first serious warning signal was given in May 2023 when he had to announce the failure of a “major partnership” in video games which was to bring him more than 2 billion dollars. In the process, the stock lost 44%.
A month later, the group announced a vast restructuring plan involving studio closures and the cancellation of game projects to reduce its personnel costs by 10%.
But Embracer was still struggling recently to fulfill its promises since it announced in February 2024 that it would probably not be able to reduce its debt below 8 billion crowns (690 million euros) before the end of March and that its sales, at constant scope, had fallen by 4% at the end of the year.
Learn lessons
“We must learn the lessons of this time,” Mr. Wingefors said Monday.
The division of the group into three listed companies should allow each “to concentrate better” on its own strategy.
Asmodee Group will bring together board games activities for an annual turnover estimated at 14.8 billion crowns (1.28 billion euros).
Coffee Stain & Friends will bring together games for PC, consoles and mobile, including free-to-play, low-budget but high-margin, high-cash-generating community games. Its annual sales are said to be around SEK 10.9 billion.
The best-known video game activities requiring the highest investments will be concentrated in the company Middle-earth Enterprises & Friends. It will thus manage the intellectual property rights of Lord of the Rings and Tomb Raider. It will represent a turnover of 14.1 billion SEK (1.2 billion euros).
“As a standalone company, Middle-earth Enterprises & Friends will operate as a more transparent entity, providing a better structure to maximize the potential of its highly strategic franchises,” explains Embracer.
This decision seemed to please investors since Embracer shares soared 10% to 27.69 Swedish crowns early in the afternoon on the Stockholm Stock Exchange.
“Thanks to this new structure, the three entities will be able to concentrate on implementing their core strategies and exploiting their own strengths,” said Kicki Wallje-Lund, chairwoman of the board of directors of the group. in the press release.
In financial terms, Asmodee and Coffee Stain & Friends shares will be distributed to Embracer shareholders, in the form of dividends, while Middle-earth Enterprises & Friends will replace Embracer as the main listed company.
The listing of Asmodee should take place “within twelve months” while that of Coffee Stain & Friends is planned for 2025, according to the press release.
Lars Wingefors, holder of 20% of the capital via his investment company, promised that he would remain “a long-term, active, committed and supportive owner of the three entities”, according to the press release.