Embracer sells Borderlands maker Gearbox to Take-Two Interactive for $460 million

Crumbling conglomerate Embracer Group has sold key Gearbox Software assets to Take-Two Interactive Software in a deal worth $460 million.

The divested assets include studios like Gearbox Software, Gearbox Montreal, Gearbox Studio Quebec. Take-Two will also acquire major franchises such as Borderlands, Tiny Tina's Wonderlands, Homeworld, Risk of Rain, Brothers in Arms, and Duke Nukem.

Embracer will retain ownership of Gearbox Publishing San Francisco (formerly known as Perfect World Entertainment), including the publishing rights to the Remnant franchise, Hyper Light Breaker, and other "notable" unannounced releases. Lost Boys Interactive, Captured Dimensions, and Cryptic Studios, including projects such as Neverwinter Online and Star Trek Online, will also be staying put.

The deal was announced around three years after Embracer merged with Gearbox for a day one purchase price of $363 million. The company said the total value of that deal, including expensed development costs, could eventually exceed $1.3 billion over six years. It's unclear how much Embracer eventually spent on the Gearbox merger.

At the time, Embracer CEO Lars Wingefors described Gearbox as "arguably one of the most creative and valuable independent developers in the world." Now, however, Embracer is preparing to jettison the company in the hopes of reducing net debt and becoming sustainable.

"Today's announcement marks the result of the final structured divestment process and is an important step in transforming Embracer into the future with notably lower net debt and improved free cash flow," said Wingefors. "Through the transaction, we lower business risk and improve profitability as we transition to becoming a leaner and more focused company.

"After evaluating several options for Gearbox, I am happy that we have reached a solution that is in the best interest of all stakeholders. Randy [Pitchford] and the team have been great team members throughout the past years, and I would like to thank them all for that. As one of the world’s greatest games developers, I am confident that Gearbox will continue to innovate and thrive in their new home within Take-Two."

Gearbox boss indicates split from Embracer is for the best

Gearbox CEO and co-founder, Randy Pitchford, said he believes in the long-term viability of Embracer's current debt reduction strategy, which has so far seen the company lay off almost 1,400 workers, cancel a number of projects, and shutter or divest numerous studios in pursuit of sustainable growth and generating shareholder value.

"I am completely convinced that this transaction is the best possible scenario and an obvious net positive arrangement for Embracer Group, for Take-Two and, of course, for Gearbox Entertainment," he said. "My primary interest is always Gearbox, including our talent and our customers. I want to personally ensure fans of our games that this arrangement will ensure that the experiences we have in development at Gearbox will be the best it can possibly be."

Take-Two has splashed out almost half a billion on Gearbox despite recently confirming it's preparing to implement a cost reduction plan of its very own. The Grand Theft Auto publisher said the deal represented a chance to expand its internal development team with "proven industry-leading talent."

"Our acquisition of Gearbox is an exciting moment for Take-Two and will strengthen our industry-leading creative talent and portfolio of owned intellectual property, including the iconic Borderlands franchise," Take-Two chairman and CEO, Strauss Zelnick.

"This combination enhances the financial profile of our existing projects with Gearbox and unlocks the opportunity for us to drive increased long-term growth by leveraging the full resources of Take-Two across all of Gearbox’s exciting initiatives."

Gearbox and Take-Two have been frequent collaborators over the years, with the latter publishing all three main entries in the Borderlands series through its 2K subsidiary. The next instalment in the franchise is currently in active development, and 2K president David Ismailer said the company is "thrilled" to have Gearbox working on the project in-house.

"With nearly 20 years of history working together, Gearbox has played an integral role in our success, given their unique ability to create interactive entertainment experiences that feature beloved characters, exciting new worlds, and humorous storytelling,” added Ismailer.

"We are thrilled to welcome Randy Pitchford and his team of passionate, talented developers to 2K and we look forward to releasing numerous projects in the future as colleagues.  We have loved partnering with Gearbox on every iteration of the

Borderlands franchise and are excited to be in active development on the next instalment in the series."

This is the second significant divestment Embracer has sanctioned in recent weeks. Earlier this month, the company sold a bundle of "core" Saber Interactive assets to Beacon Interactive in a deal worth $247 million.