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INSIDE INFORMATION
The day one purchase price amounts to
"Gearbox is arguably one of the most creative and valuable independent developers in the world. We believe that the resources offered by Embracer will position Gearbox for continued significant growth in the years to come" says
"Lars's vision of Embracer as an allied partner group committed to fueling and accelerating the ambitions of a series of decentralized, successful entrepreneurial member companies while magnifying the collective value and advantages of diversification across the entire group is the most brilliant strategy and design for short, medium, and long-term success in this industry that I have worked in during 30 years. The feeling at Gearbox is that we are just getting started and this transaction is not merely a stimulant for the talent of our employee-owned company, but a propellent for the exciting future we have planned." said
Background and strategic rationale
Gearbox was founded in 1999 and is to date fully owned by
Through the merger, Embracer onboards one of the leading independent companies within the games industry, with proven experience of creating long-lasting franchises and delivering strong original content. The merger will enable collaboration within Embracer in terms of development, publishing, technology, IPs as well as a platform for further M&A in
The Transaction in brief
Upfront consideration -
USD 188 million in cash; and-
7,438,983 B shares in Embracer, equivalent to
USD 175 million , divided into equal parts subject to a one-year (12 months) and two-year (24 months) lock-up period, respectively.
Operational earn out - up to
USD 150 million in cash; and-
6,376,271 B shares in Embracer, equivalent to
USD 150 million , vesting over six years, conditional upon completion of certain projects and that certain key employees remain employed by Gearbox 6 years following completion of the transaction.
Financial earn out - up to
- Financial earn out 1: Up to
USD 180 million in cash; and -
8,926,780 B shares in Embracer, equivalent to
USD 210 million , subject to the financial development of Gearbox. If the accumulated Adjusted EBITDA over four years exceedsUSD 335 million , the Financial earn out 1 will be triggered and will range fromUSD 210 million toUSD 390 million on a proportionate basis based on an accumulated Adjusted EBITDA ranging fromUSD 335 million toUSD 621 million . If earned, the Financial earn out 1 will be payable in shares until the aggregate amount isUSD 210 million and all amounts in excess ofUSD 210 million will be paid in cash.. If the accumulated Adjusted EBITDA is lower thanUSD 335 million , the financial earn out 1 is zero. If the accumulated Adjusted EBITDA is higher thanUSD 621 million , the financial earn out is capped atUSD 390 million . - Financial earn out 2: Up to
USD 325 million in cash, subject to the financial development of Gearbox. If the accumulated Adjusted EBITDA over six years exceedsUSD 702 million , the Financial earn out 2 will be triggered and will range fromUSD 175 million toUSD 325 million on a proportionate basis based on an accumulated Adjusted EBITDA ranging fromUSD 702 million toUSD 1,304 million . If the accumulated Adjusted EBITDA is lower thanUSD 702 million , the financial earn out 2 is zero. If the accumulated Adjusted EBITDA is higher thanUSD 1,304 million , the financial earn out is capped atUSD 325 million . -
The Earn-Out Consideration Shares will be issued at a price of
SEK 197.57 per share which equals the 20 day volume weighted average price of Embracer B shares on Nasdaq First North Growth Market up to and including2 February 2021 , and using the FX rate USD/SEK of 8.3984 as of2 February 2021 . - The Earn-Out Consideration Shares will be freely tradable when earned following fulfillment of operational and financial targets. The Earn-Out Consideration Shares are issued when earned and released if targets are met.
- Financial earn out 1 catchup mechanism: If the financial targets for Financial earn out 2 over six years are met, Financial earn out 1 may be recovered on a proportionate basis based on the cumulative financial performance over six years..
Issue of Closing Consideration Shares and Additional Consideration Shares
The Closing Consideration Shares represent 1.7 percent and 1.0 percent of the total number of shares and votes in Embracer, respectively, on a fully diluted basis. By issuing the Closing Consideration Shares, the number of shares and votes increase by 7,438,983. The share capital increases by approximately
The Additional Consideration Shares assuming full payment represent 3.5 percent and 2.1 percent of the total number of shares and votes in Embracer, respectively, on a fully diluted basis. By issuing the Additional Consideration Shares the number of shares and votes increase by 15,303,051. The share capital increases by approximately
In total, the Closing Consideration Shares and maximum Additional Consideration Shares together represent 5.1 percent and 3.0 percent of the total number of shares and votes in Embracer, respectively, on a fully diluted basis. By issuing the Closing Consideration Shares and Additional Consideration Shares the number of shares increases by 22,742,034 to 446,541,711 and the number of votes increases by 22,742,034 to 747,133,944 (divided among 33,399,137 A shares and 413,142,574 B shares). The share capital increases by approximately
The Closing Consideration Shares and Additional Consideration Shares are issued at a price of
Upon completion of the transaction the board of directors will resolve to issue the Closing Consideration Shares pursuant to authorization granted by a general meeting. The Earn-Out Consideration Shares are issued when earned and released if targets are met.
Completion of the transactionThe transaction is expected to be completed within three months after which Gearbox will be consolidated into
[1] Adjusted Operational EBIT=Operational EBIT adjusted for non-recurring items, e.g. costs for share based compensation and similar which are cancelled as a consequence of Gearbox becoming a subsidiary to Embracer.
[2] Source: Statista (2020)
Advisers
Responsible party
This information constitutes inside information that
For additional information, please contact:
Tel: +46 708 47 19 78
E-mail: lars.wingefors@embracer.com
Beatrice Flink
Tel: +46 704 525763
E-mail: beatrice.forsgren@embracer.com
E-mail: dan.hewitt@gearboxsoftware.com
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Forward-looking statements
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