Embracer splitting into three standalone companies to search for 'winning formulas'

Swedish conglomerate Embracer Group is transforming into three standalone publicly listed companies that will reflect its interest in unique market segments.

The move will see Embracer reshuffle some elements of its video game business into a new company called 'Coffee Stain & Friends,' which it claims will become "the leading and most innovative developer of community-driven games for PC/console and mobile."

"As a standalone company, 'Coffee Stain & Friends' will be able to better showcase its high margin profile and strong cash flow profile coupled with an enhanced ability to resume and allocate resources towards opportunities to maximize the long-term value creation," reads a press release.

Coffee Stain & Friends will operate under two distinct segments: Premium and Free-to-play. Those premium console and PC operations will include studios like Coffee Stain, Ghost Ship, Tarsier, Tuxedo Labs, as well as THQ Nordic and Amplifier Game Invest. It will also comprise franchises such as Deep Rock Galactic, Goat Simulator, Satisfactory, Wreckfest, Teardown, Valheim, as well as more than 200 other IPs.

"Free-to-play operations will include Easybrain, Deca, CrazyLabs and Cryptic. Intellectual properties include Sudoku.com, Blockudoku, Jigsaw Puzzle and many other IPs," added Embracer. "Key published free-to-play games based on licensed IPs include Star Trek Online and D&D Neverwinter Online."

Another new business called 'Middle-earth Enterprises & Friends' will be split off to develop "immersive world-class entertainment IPs, including the iconic Lord of the Rings, leveraging in-house triple-A capabilities and formidable partnerships." It will also feature key video game studios.

"As a standalone company, 'Middle-earth Enterprises & Friends' will operate as a more transparent entity, offering a better structure to maximize the potential of its highly strategic franchises, with focus on the Lord of the Rings and a number of other key IPs," continued Embracer. "Decision-makers will be closer to the organization, leading to enhanced capital expenditure management, accountability, and well-balanced investments to optimize financial performance and profitable growth over the long term."

Game studios including Crystal Dynamics, Dambuster Studios, Eidos-Montréal, Flying Wild Hog Studios, Tripwire, Vertigo Games, Warhorse Studios 4A Games and others will be housed within Middle-earth Enterprises & Friends. They'll be joined by franchises including Dead Island, Killing Floor, Kingdom Come Deliverance, The Lord of the Rings, Metro and Tomb Raider, among many others. PLAION, Freemode, Dark Horse and other businesses will be bundled into this entity.

Embracer will also be listing Asmodee as a standalone entity, with the tabletop game company having secured €900 million in financing as part of the separation. The proceeds from that financing will be used to pay existing debt and reduce leverage in the remaining Embracer Group.

Embracer CEO claims new structutre will unlock "full potential of each team"

Embracer Group CEO Lars Wingefors–who recently oversaw a colossal restructuring campaign that resulted in studio closures, significant divestments, project cancellations, and mass layoffs–intends to form a new long-term ownership structure and will remain an "active, committed, and supporting owner of all three entities."

Shareholders representing over 50 percent of the capital and votes in Embracer group have expressed support for the transformation plan, which Wingefors claims will "unleash the full potential of each team."

"This move has been made with the intention to unleash the full potential of each team and provide them with their own leadership and strategic direction. This 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, with an evergreen horizon," added Wingefors. "This move towards three independent companies reinforces Embracer’s vision of backing entrepreneurs and creators with a long-term mindset, allowing them to continue to deliver unforgettable experiences for gamers and fans across the globe."

Embracer provided a brief financial breakdown of each new entity in a press release and noted that each one will be able to "fully utilize its own balance sheet, its own set of financial targets and optimal financing structure and capital allocation strategy." Here's the current lowdown:

Embracer is already priming its leadership teams for the split, and explained that Coffee Stain CEO Anton Westbergh will oversee the process leading up to the separation of Coffee Stain & Friends.

Embracer Group's current interim chief strategy officer, Phil Rogers, will oversee the separation of Middle-earth Enterprises & Friends. Longstanding Asmodee operational and executive leader, Thomas Koegler, will in the coming months become CEO of the business, replacing current CEO Stephane Carville.

As of April 22, 2024, the executive management of Embracer Group will consist of Lars Wingefors (Group CEO), Johan Ekström (Group CFO and deputy CEO), Careen Yapp (Chief Strategic Partnership Officer), Ian Gulam (Chief of Staff, Legal & Governance), Anton Westbergh, Phil Rogers, and Stéphane Carville.

Embracer is changing, but group CEO Lars Wingefors isn't going anywhere

In an open letter discussing the transformation, Wingefors indicated that he fully intends to stick with Embracer for the long-haul. "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 fulfil that," he wrote. The chief exec said Embracer's journey so far hasn't always been a "straight road," presumably referring to the 1,400 workers that were laid off in the space of six months, but added that he's "very proud" of what the Embracer team has achieved in uniting some of the "most extraordinary companies and IPs in the games and entertainment industry" under one roof.

"History has shown that diversified groups like ours can significantly enhance their chances of success by adopting a more agile, fast-moving approach and focusing on well-defined core market segments," he continued.

"Numerous inspiring examples from Sweden illustrate how large enterprises have achieved greater success by dividing into multiple separate specialized companies. I am deeply motivated and inspired by these success stories and believe they offer valuable insights for our own strategic direction.

"The time is right for Embracer to become three public companies, each boasting sufficient scale, coherent strategies, specialized business models and empowered by visionary leadership teams. Rather than imposing conformity on thriving businesses, we should foster an environment that amplifies existing success. I am confident that this will be easier with three distinct winning formulas in specific market segments."

Wingefors claimed there is "not one way to do business" and feels the split will enable each new company to realise "significant untapped potential." He noted that all three businesses will still be able to co-operate "when it makes sense," but will crucially be able to execute unique go-to-market strategies.

"This 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, with an evergreen horizon," he continued. "Moving towards three independent companies reinforces Embracer’s vision of backing entrepreneurs and creators with a long-term mindset, allowing them to continue to deliver unforgettable experiences and entertainment across the globe.

"I would especially like to thank all employees standing with us in the past challenges. Today marks the first day of the new journey, let's join it together and create the future."