Embracer reveals that a mystery $2 billion deal has fallen through


Shares in the Swedish company Embracer fell more than 40% at the news an unspecified $2 billion deal fell through, as the firm slashes its revenue forecast for next year.

Embracer has just revealed its financial results for the past year, and there’s a tantalising detail in there. Apparently, the very night before the results were announced, a long-negotiated deal worth more than $2 billion in revenue over six years fell through. The news sent Embracer’s share’s plummeting by more than 40% to a record low.

Naturally, everyone is now wildly speculating as to which company Embracer was negotiating with for what would have been a “groundbreaking strategic partnership agreement that would have set a new benchmark for the gaming industry”.

The press release drips with barely disguised frustration.

“Negotiations have been taking far longer than originally anticipated considering we had a verbal commitment already in October 2022,” it moans. “The transaction had many of the highest rated global advisories onboard with several hundred people engaged on both sides. All documentation was finalized and ready to go as of yesterday. We asked for the execution of the agreement before our Q4 announcement. However late last night we received a negative outcome from the counterparty. This decision was unexpected to the management and the Board of Directors of Embracer.”

Of course, now we’re all desperate to know who Embracer was negotiating with. The Swedish firm gobbled up Tomb Raider maker Crystal Dynamics last year, along with a platter of high-value IPs including The Lord of the Rings. What company was next on the menu?

Going by the claim in Embracer’s report that the deal would have included “more than USD 2 billion in contracted development revenue over a period of six years”, the targeted firm must be a pretty big fish in the games industry pond. Our thoughts initially turned to Ubisoft, which has been on a somewhat downward trajectory of late, and which declared a €495 million ($538 million) loss in its latest financial results. Embracer overtook Ubisoft in terms of market capitalisation back in 2021, so it’s conceivable that the Swedish firm might attempt a buyout – plus several private equity firms were apparently considering a purchase of Ubisoft last year.

Then again, the figure of $2 billion in revenue over six years might be a tad low if we’re talking about Ubisoft, which reeled in around €1.8 billion in revenue last year alone. It’s likely to be a smaller firm, and our suspicions are hovering over Amazon Games. Embracer announced that Amazon would be publishing the latest Tomb Raider game back in December, and then said Amazon would be making a new Lord of the Rings MMO earlier this month. The two firms certainly seem to be getting cosy together. Perhaps Amazon Games was going to be spun off the Amazon parent company and taken under the wing of Embracer?

Possibly. Amazon has been flinging money at video games with little to show in the way of returns for years now, so perhaps partnering with Embracer could have been a way to shed the company’s gaming arm. Maybe. Perhaps we’ll find out more in the coming days.

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