Embracer Group lets go of Borderlands maker for $460M after three years

Embracer Group has been backing away from its all-encompassing position in the games industry lately. The latest divestment is Gearbox Entertainment, the studio behind the Borderlands series it bought in early 2021 for a deal that could have been worth up to $1.37 billion to Gearbox had it stayed inside the Swedish conglomerate’s grasp.

The buyer is Take-Two Interactive Software, which had previously partnered with Gearbox on publishing Borderlands and other titles. Take-Two will issue new shares of its common stock to pay $460 million for Gearbox, to be completed before the end of June this year. Embracer paid $363 million in cash and stock for Gearbox in 2021 but promised up to $1 billion more should the developer hit earnings goals over six years.

“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 Embracer CEO Lars Wingefors in a statement intended to start nobody’s imagination running.

Gearbox has studios in Texas, Montreal, and Quebec. The firm had 550 employees at the time of its acquisition, but divisions of the company had seen layoffs in January.

Not every piece of Gearbox is changing hands, however. Gearbox Publishing San Francisco, which claims Remnant, Hyper Light Breaker, and other titles, is sticking with Embracer and will be renamed. Take-Two described such third-party publishing as “non-core to its business” in a press release.

Gearbox will operate as a studio inside 2K and will continue to be led by its founder and CEO, Randy Pitchford. Pitchford’s leadership of Gearbox has seen the company engaged in a number of controversies and lawsuits, with him at the center, including a legal battle with former counsel that involved a USB stick containing porn Pitchford said he was investigating, accusations of abuse and underpayment by the former voice of Borderlands’ Claptrap, and suggestions of misappropriation of funds. Pitchford has denied the allegations and largely attributed them to disgruntled former employees.

The sales will continue until revenue improves

Embracer had been acquiring properties in 2021 and 2022 with an understanding that a planned $2 billion investment from the Saudi-government-backed Savvy Games Group would give the new mega-conglomerate some runway. The publisher acquired, in addition to Gearbox:

• Square-Enix’s Western studios (Tomb Raider, Legacy of Kain, Deus Ex)
• Tripwire Interactive (Killing Floor, Maneater)
• Tuxedo Labs (Teardown)
• Tatsujin (arcade games)
• Bitwave (8-bit ports)
• Limited Run Games (physical releases of historic titles)
• Singtrix (karaoke)
• Gioteck (accessories)
• Saber Interactive/4A Games (Metro Exodus)
• Deep Silver Volition (Saint’s Row, Red Faction)

Such was Embracer’s momentum that its acquisition of the Tolkien estate’s IP rights for Lord of the Rings and other titles in August 2022 seemed strangely par for the course.

Once the Saudi deal fell through in May 2023, however, the firm announced that it would undergo a major restructuring through March 2024. That included the shutdown of Volition in August 2023 and deep cuts at Eidos that took an unannounced Deus Ex title with them.

Gearbox and its Borderlands franchise were the biggest get, however. The looter-shooter series, struck through with (often exhausting) “edge-y” humor, has reportedly sold more than 77 million copies and earned more than $1 billion in revenue throughout its run, according to Bloomberg. Take-Two made note that a Borderlands game was “in active development” at Gearbox in its acquisition announcement.