Embracer on collapsed $2bn deal: "We have put this behind us"

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Embracer Group is keen to move on from the collapse of a partnership worth at least $2 billion, claiming the deal is now "history" and the company has "taken control in our own hands."

That's according to CEO Lars Wingefors, who was quizzed by investors during the company's latest earnings call (transcribed by Seeking Alpha) about the potential collaboration with an unnamed partner that was revealed back in May.

At the time, Wingefors said the partnership would have "set a new benchmark for the industry" but fell apart at the last minute due to "external factors."

Earlier this week, it was reported that Savvy Games Group – the publishing and esports firm owned by Saudi Arabia's Public Investment Fund – was the company that backed out of this deal.

During the earnings call, one investor asked Wingefors about these claims, to which the CEO said he would not comment on who the partner was – in part for legal reasons.

He also indicated Embracer and the mysterious partner may explore a similar deal in future.

"You don't comment on business partnerships unless both partners would like to do that," he said. "But again, as stated, when announcing the news last quarter, the background given to us why the partnership didn't happen was not because of the terms or the pipeline of games.

"It was more, 'Yes, they would like to do something in the future, but not now,' which became a 'no' for us."

When pressed further about the deal later, Wingefors said that he believes such a strategic partnership is "still valid."

"We do that with industry partners already today, but this was on the greater scale and Embracer again, being the only company with such a broad pipeline, including a significant priority of IPs, well-known IPs, licensed IPs, I think it's a very interesting proposal for players," he said.

"Now that's history. Now we have taken control in our own hands. We are adapting, adjusting, and we have left this behind us. I personally have done a lot of learnings, and it's been, I have to say, painful. But as an entrepreneur, you learn as you go."

A month after Embracer disclosed the collapse of the deal, the group announced a cost-cutting restructuring program that will lead to an unknown number of studio closures and layoffs.

At present, the company's net debt stands at SEK 16.8 billion ($1.5 billion) with the aim of reducing it to SEK 8 billion ($728.2 million) by the end of Embracer's financial year on March 31, 2024.

So far the only studio known to be affected is Campfire Cabal, which opened doors just over a year ago.

Wingefors said Embracer is "making good progress" on the restructuring program, adding that the group is working to find new partners for any games it plans to drops and "new homes [for] certain studios."

Embracer Group currently has 215 games in development, only 62 of which have been announced. Wingefors said that most of the titles that get cut will be "further out in that slate," but added that it's too early to say how many.

He was also asked about hiring practices; while the company has warned there will be layoffs, it is also still hiring. The CEO explained that this will only be "when needed with new talents for specific investments or businesses."

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