INSIDE INFORMATION:
The aggregated day one purchase price for the Transactions amounts to approximately
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
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
"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
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,
Within premium games, the addition of Ghost Ship as a sister company to Coffee Stain in
Saber is acquiring
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
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
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
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E-mail: lars.wingefors@embracer.com
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Forward-looking statements
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