New details have surfaced about the collapsed $2 billion deal that Embracer Group was supposed to close earlier this year. It appears that its partner was Savvy Games Group, an investing firm established by Saudi Arabia’s sovereign wealth fund.

Savvy Games Group named the partner in Embracer Group's collapsed $2 billion deal that sent its stock plummeting

What is known about the collapsed deal between Embracer and Savvy Games Group?

  • When Embracer Group released its report for the full fiscal year (ended March 31, 2023), the company announced that “one major strategic partnership that has been negotiated for seven months will not materialize.”
  • The deal would have included over $2 billion in contracted development revenue over the next six years. Embracer didn’t disclose the name of the partner at the time, but the company’s shares nearly halved shortly after.
  • It turns out that the previously unnamed partner was Savvy Games Group, Axios reported citing documentation related to the deal and information four sources familar with the matter.
  • Established by Saudi Arabia’s Public Investment Fund (PIF), Savvy Games Group is focused on investing in game companies across the globe. It already owns stakes in Nintendo, Capcom, NCSoft, Take-Two, Eelectronic Arts, Activision Blizzard, and more.
  • Last year, Savvy invested $1 billion in Embracer Group, becoming its second-largest shareholder with a 7.46% stake. Its founder and CEO Lars Wingefors remains at the top, controlling 19.6% of the holding company.
  • According to Axios, the collapsed deal woudl have involved Savvy investing in the development and publishing of games from Embracer Group. But it is unclear why exactly the Saudi-backed firm suddenly walked away from the $2 billion partnership.

How did the collapsed deal affect Embracer Group?

  • After its shares plunged nearly 50%, Embracer announced a business restructuring and its switch to cost-cutting mode.
  • The goal of the program that will last until March 2024 is to trasnform the company from its “current heavy-investment-mode to a highly cash-flow generative business” by signficantly lowing its net debt and generating more profits with less and higher margins in the PC and console markets.
  • As part of the restructuring, Embracer will be closing some of its first-party studios, freezing some games currently in production, cutting non-development costs, and revising the review process for current and new titles in terms of investment required.
  • The Swedish holding company has already closed shut down Campfire Cabal, a subsidiary of THQ Nordic that was established last year by industry veterans who worked on games like Expeditions: Rome, Hitman, and Warface.
  • Last month, Embracer Group also raised over $180 million through a direct share issue, saying that it will help the company achieve certain goals of its restructuring program.

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