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Embracer Group AB to split into three different listed companies - Asmodee, Coffee Stain & Friends, Middle-Earth Enterprises & Friends

MarcoP90

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INSIDE INFORMATION: The Board of Directors of Embracer Group AB (“Embracer Group”) today announces a transformative step for value creation through a separation of the group into three market-leading games and entertainment companies: Asmodee Group, “Coffee Stain & Friends”[1] and “Middle-earth Enterprises & Friends”[1]. The three entities will be separate, publicly listed companies, enabling each entity to better focus on their respective core strategies and offer more differentiated and distinct equity stories for existing and new shareholders. This will enable the entities to unlock value in the high-quality assets of Embracer Group following the successful completion of the restructuring program.

Key Process Component

  • Shares of Asmodee Group (“Asmodee”) and “Coffee Stain & Friends” are intended to be distributed as a dividend to the shareholders of Embracer Group and listed on Nasdaq Stockholm, in accordance with the Lex ASEA rules. “Middle-earth Enterprises & Friends” is intended to remain within the current listed company Embracer Group, which will subsequently be renamed.
  • The listing and distribution of shares (the “distribution” or “spinoff”) in Asmodee is expected to take place within 12 months and the listing and distribution of shares in “Coffee Stain & Friends” during calendar year 2025.
  • As part of the Asmodee separation process, Embracer Group has, through Asmodee Group, entered into a new financing agreement amounting to EUR 900 million. The proceeds from the financing are used to repay existing debt and reduce leverage in the remaining Embracer Group. As announced today and further detailed in a separate press release available at embracer.com/investors.
  • As part of the transformation and ahead of each separation the full capital structure, including both equity and debt, will be reviewed in Asmodee and “Coffee Stain & Friends” to create the best possible long-term foundation for each entity as a separately listed company.
  • The largest shareholder, Lars Wingefors AB, intends to form a new long-term ownership structure, including the current holdings in Embracer Group (approximately 20% of capital and 40% of votes), and will remain a long-term, active, committed and supportive owner of all three entities.
  • Shareholders representing more than 50 percent of the capital and votes in Embracer Group have expressed support for the transformation plan.

The three new entities more in detail

Asmodee


A global leading tabletop games publisher and distributor with an extensive studio network and IP catalogue.
  • Net Sales of SEK 14.8 billion and Adjusted EBIT of SEK 1.9 billion on a pro forma basis as per LTM[2] December 2023
[...]

Asmodee is a leading international publisher and distributor of board games, trading cards and digital board games with 23 fully owned studios and 300+ IPs and constitutes the Tabletop Games operating segment of Embracer Group. As per LTM December 2023, Asmodee generated net sales of SEK 14.8 billion, with Adjusted EBITDA of approximately SEK 2.3 billion, EBITDAC of approximately SEK 2.0 billion, Adjusted EBIT of approximately SEK 1.9 billion and free cash flow after working capital of approximately SEK 2.1 billion.

[...]

23 in-house studios develop tabletop games for all types of players across Social, Tabletop and Lifestyle, including a steady addition of new content to key brands. The catalog of 300+ owned IPs include the beloved board games Ticket to Ride®, 7 Wonders, Azul, CATAN, Dobble, Exploding Kittens and an extensive number of distributed games and IPs. Asmodee is also developing a wide range of licensed tabletop games based on The Lord of the Rings, Marvel, Game of Thrones, Netflix, Lego® and Star Wars™, including the recent successful trading card game release of Star Wars: Unlimited.

Coffee Stain & Friends

a diverse gaming entity with a dual focus on indie and A/AA premium and free-to-play games for PC/console and mobile, with a high degree of recurring revenues.
  • Net Sales of SEK 10.9 billion, Adjusted EBIT of SEK 2.8 billion on a pro forma basis as per LTM December 2023.
[...]

The entity will operate under two distinct segments: Premium and Free-to-play. Premium PC/console operations will include among other Coffee Stain, Ghost Ship, Tarsier, Tuxedo Labs, as well as THQ Nordic and Amplifier Game Invest. Intellectual properties include Deep Rock Galactic, Goat Simulator, Satisfactory, Wreckfest, Teardown, Valheim[4], as well as more than 200 other IPs. Free-to-play operations will include Easybrain, Deca, CrazyLabs and Cryptic. Intellectual properties include Sudoku.com, Blockudoku, Jigsaw Puzzle and many other IPs. Key published free-to-play games based on licensed IPs include Star Trek Online and D&D Neverwinter Online.

Middle-earth Enterprises & Friends

A creative powerhouse in AAA game development and publishing for PC and console, as well as the stewards of The Lord of the Rings and Tomb Raider intellectual properties, among many others.
  • Net Sales SEK of 14.1 billion, Adjusted EBIT SEK 2.0 billion on a pro forma basis as per LTM December 2023.
[...]

As a standalone company, “Middle-earth Enterprises & Friends” will operate as a more transparent entity, offering a better structure to maximize the potential of its highly strategic franchises, with focus on the Lord of the Rings and a number of other key IPs. Decision-makers will be closer to the organization, leading to enhanced capital expenditure management, accountability, and well-balanced investments to optimize financial performance and profitable growth over the long term.

“Middle-earth Enterprises & Friends” will be the home of critically acclaimed studios, including Crystal Dynamics, Dambuster Studios, Eidos-Montréal, Flying Wild Hog Studios, Tripwire, Vertigo Games, Warhorse Studios and 4A Games among many others. IPs includes Dead Island, Killing Floor, Kingdom Come Deliverance, The Lord of the Rings, Metro and Tomb Raider, among many others. The group will include PLAION, Freemode, Dark Horse and other businesses.

Note: the full names for both "Coffee Stain & Friends" and "Middle-Earth Enterprises & Friends" will be decided at a later date.
 
"The largest shareholder, Lars Wingefors AB, intends to form a new long-term ownership structure, including the current holdings in Embracer Group (approximately 20% of capital and 40% of votes), and will remain a long-term, active, committed and supportive owner of all three entities."

As long as the head that caused this tragedy remain on charge, there is non a single reason to expect a turnaround in the business. The embracer brand will dissapear, of course, but the Wingefors name will be there to prevent the potential whitewashing.

Interesting that they decided to separate THQ from the big studios.
 
Wow, its finally over.

The VC, predatory debt fuelled attempt to monopolise large parts of the gaming industry and then sell at the top or increase rent has thankfully and rightfully crashed like the train wreck it always was.

That letter by Yars is the one of most embarassing things I've read from a CEO. Yes, I'm sure you buying Asmodee, Coffee Stain, CD and co for billions, going on for 5 years to say how you wish to personally build the biggest gaming library and selling that snake oil to predatory VCs and then forced to break it all apart and selling on a discount is exactly the inspiration you got from looking inwards!

I was increasingly disappointed to see well known devs and pubs have their C-class Execs take the Embracer cheque instead of doing due diligence and thinking about the consequences of VC fuelled, debt fuelled roll ups. Similar to their Private Equity cousins, these rolls up are mostly used to monopolise a niche part of an industry, tie the company with enormous unsustainable debt, increase prices and extract all profit into the PE/VC pocket and then bankrupt the firm with no consequences. Its daylight robbery and should be criminalised.

Asmodee never made sense to me, an incredibly profitable company on its own, being bought by Embracer would only result in Embracer stealing Asmodee's profits to shore up the losses in its unsustainable games business.

Anyway, Asmodee should be back to normal.

I suspect the AAA Middle Earth Enterprises will be bought soon, most likely by Amazon.
I worry a bit about Coffee Stain, AA segment is very hard, let alone being a collection of AA studios. Not sure who will acquire them.

Also yes, looks like the sole purpose of this is to be acquired, Embracer as a whole was clearly unattractive to anyone with a brain, except Lars of course.
 
I wouldn't suspect any of these companies to be bought for a couple years at least. I'm pretty sure the idea is to split the companies to have independent stock since no one is buying in this economy. If this was for purchase, it would have been with the Gearbox/Saber divestments. As independent stock, something like Valheim happening again could spur up Coffee Stain while they aren't harmed from Middle Earth failing to deliver Tomb Raider on time or having underwhelming Metro sales.
Coffee Stain is probably the division to have the most success since it seems like most of Embracer's biggest successes. Deep Rock Galactic, Goat Simulator, Satisfactory, Teardown, and Valheim were all multimillion sellers despite being AA or lower productions. All of Middle Earth stuff is technically the biggest IP but, they haven't been the equivalent big returns, especially once we limit it to the past 5 years. Kingdom Come may be the only exception in their listed titles. If Amazon was going to buy Middle Earth, they could have done so already several times.
 
It's hard not to look at the true end of Game Industry Galactus as a good thing, even if Lars is still involved.

A whole ton of studios are going to get closed. The Galactus era died with the good interest rates, all that is left is people repeatedly eating shit.

Grats to all of the publishers that sold unprofitable studios to Embracer. Sad for all of the developers that are going to lose their jobs.
 
Wow, its finally over.

The VC, predatory debt fuelled attempt to monopolise large parts of the gaming industry and then sell at the top or increase rent has thankfully and rightfully crashed like the train wreck it always was.

That letter by Yars is the one of most embarassing things I've read from a CEO. Yes, I'm sure you buying Asmodee, Coffee Stain, CD and co for billions, going on for 5 years to say how you wish to personally build the biggest gaming library and selling that snake oil to predatory VCs and then forced to break it all apart and selling on a discount is exactly the inspiration you got from looking inwards!

I was increasingly disappointed to see well known devs and pubs have their C-class Execs take the Embracer cheque instead of doing due diligence and thinking about the consequences of VC fuelled, debt fuelled roll ups. Similar to their Private Equity cousins, these rolls up are mostly used to monopolise a niche part of an industry, tie the company with enormous unsustainable debt, increase prices and extract all profit into the PE/VC pocket and then bankrupt the firm with no consequences. Its daylight robbery and should be criminalised.

Asmodee never made sense to me, an incredibly profitable company on its own, being bought by Embracer would only result in Embracer stealing Asmodee's profits to shore up the losses in its unsustainable games business.

Anyway, Asmodee should be back to normal.

I suspect the AAA Middle Earth Enterprises will be bought soon, most likely by Amazon.
I worry a bit about Coffee Stain, AA segment is very hard, let alone being a collection of AA studios. Not sure who will acquire them.

Also yes, looks like the sole purpose of this is to be acquired, Embracer as a whole was clearly unattractive to anyone with a brain, except Lars of course.
i think we went through this before but embracer is not VC funded, nor even debt really. it was vast majority equity with a little bit of debt on the way up, and then more debt and a little bit of equity on the way down as a stopgap measure
 
i think we went through this before but embracer is not VC funded, nor even debt really. it was vast majority equity with a little bit of debt on the way up, and then more debt and a little bit of equity on the way down as a stopgap measure

And the business model was always to actually make products rather than to gut for parts. But a bunch of things went wrong leaving it sort of fucked.
 
i think we went through this before but embracer is not VC funded, nor even debt really. it was vast majority equity with a little bit of debt on the way up, and then more debt and a little bit of equity on the way down as a stopgap measure
Equity comes with an expectation of return. What happens when those expectations are not met? What happens when that equity crashes? What happens when your equity becomes worthless? The dynamics here are very similar.

Sure they may not be VCs in name but the intention is all the same. Predation to a criminal level. The tactics used here are textbook.

In fact looking at the list of early investors that gave Lars an effective blank cheque of what half a billion: Swedish investment banks, Swedish National Pension funds, Norwegian mutual fund, a Swedish billionaire......the whole thing reeks of getting money from rich friends wink wink. Cronyism.

The accounts of Lars using his private jet, inviting execs to his home with lavish dinners is certainly something. Its even more something when you see that what Lars pays out to these execs he wines and dines in accepting to be bought out, ranging from 50-almost 100% of the entire groups operating profit.

Creative accounting to mask the amount of debt, amortisation of debt or fudging goodwill numbers to inflate the balance sheet?
Check.

Strapping a business with debt, that is not their own, in order to shift liabilities?
Check.
Asmodee is now straddled with near $1B debt, despite being a $300M+ profitable business. I wonder who's debt those workers are paying off. Its certainly not their own.

People should really read this FT expose:

Its basically fraud.
I'm still struggling to square the circle on how Embracer got funds to acquire $8B+ in acquisitions. Quick check they raised around $1.5B, but afaik the debt being accounted on their books is only $2B. Their profits, being generous is what $2-3B over the period.

This quote from Lars really says it all;
As the chef from his private jet cooks a three-course meal in the kitchen next door, 45-year-old Lars Wingefors insists that Embracer does not fit the classic playbook of a “roll-up”, in which a company aggressively buys up lots of smaller entities. “There are bad stories out there, but we need to prove that we are different,” he tells the Financial Times.
 
A whole ton of studios are going to get closed. The Galactus era died with the good interest rates, all that is left is people repeatedly eating shit.

Grats to all of the publishers that sold unprofitable studios to Embracer. Sad for all of the developers that are going to lose their jobs.
I considered the job losses guaranteed the moment studios sold to that corporate frankenstein. This is just the inevitability no longer delayed.
 
Terrible placeholder names lmao. Well, Embracer has finally come to an end. It’ll be interesting to see how these companies do as three separate entities. Embracer and this next chapter will be a very fascinating case study to look back on in 10 years.
 
So basically Embracer fell apart along those lines
  1. Saber - independent for now
  2. Gearbox - bought by T2
  3. Coffe Stain and co. - some AA studios and the ghost of THQ
  4. Frodo and Friends - LOTR and some AAA likes CD and Eidos
  5. Asmodee - tabletop and cards
  6. Shut down studios
Did I miss anything?
 
On one hand, this is probably good in the long run.

On the other hand, I cannot see Asmodee surviving this intact and given how many games Asmodee has, this is bad for the table top/board gaming industry as a whole. Leave it to Embracer to screw us one more time on the way out.
 

Embracer will load up Asmodee with €900m of debt as part of the separation in order to pay down borrowing across the rest of its operations, which includes a suite of PC game studios and the worldwide rights to the Lord of the Rings and The Hobbit.

Asmodee has remained something of a jewel in the crown of its troubled owner throughout the restructuring, having already become Embracer’s biggest earner after overtaking its PC and Console Games segment for net sales.

The company avoided large-scale job losses during the process, with numbers released in February showing its internal headcount fallen by just 82, to 2,500 people, since Embracer began restructuring last summer.

BoardGameWire predicted last month that the tabletop group’s strong performance had potentially put it in the shop window to help Embracer pay down its debt, with Embracer CEO Lars Wingefors saying at the time that Asmodee was “one of the absolute most important businesses we have”.

Asmodee will be spun off within the next 12 months through a separate stock market listing on the Stockholm bourse, with Embracer saying the move will allow the board game company to better focus on its core strategy and markets, as well as “quickly resume its value accretive M&A strategy”.

The spin-out and debt refinancing will see Asmodee’s debt reach 3.9x its adjusted earnings, compared to just 0.6x for the remainder of Embracer following the split.

Embracer CEO Wingefors told a press conference following the announcement that Asmodee would be able to handle the new debt burden.

He said, “Asmodee is a very established business with a very long track record. They have carried up to or even more than 5x leverage under their private ownership from private equity under many years. It’s a well known asset by many leading European banks and obviously they have done their homework on this.

“I feel, as they do, confident in Asmodee’s ability to deliver stable cash flows going forward. If you look at the cash flows from Asmodee over more years than the two years we’ve been owning them, it has been very stable.”
I feel bad for Asmodee. They were a profitable business that mostly avoided Embracer's job cuts, but now they're being loaded up with debt and sent off to die. Being saddled with $963 million in debt from Embracer's failed business strategy is like being sentenced for a crime someone else did. Wingefors' spiel about Asmodee being able to handle to debt is obviously self-serving PR, but I want to believe it. Because the alternative is that the company will die for Embracer's sin.
 
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Equity comes with an expectation of return. What happens when those expectations are not met? What happens when that equity crashes? What happens when your equity becomes worthless? The dynamics here are very similar.

Sure they may not be VCs in name but the intention is all the same. Predation to a criminal level. The tactics used here are textbook.

In fact looking at the list of early investors that gave Lars an effective blank cheque of what half a billion: Swedish investment banks, Swedish National Pension funds, Norwegian mutual fund, a Swedish billionaire......the whole thing reeks of getting money from rich friends wink wink. Cronyism.

The accounts of Lars using his private jet, inviting execs to his home with lavish dinners is certainly something. Its even more something when you see that what Lars pays out to these execs he wines and dines in accepting to be bought out, ranging from 50-almost 100% of the entire groups operating profit.

Creative accounting to mask the amount of debt, amortisation of debt or fudging goodwill numbers to inflate the balance sheet?
Check.

Strapping a business with debt, that is not their own, in order to shift liabilities?
Check.
Asmodee is now straddled with near $1B debt, despite being a $300M+ profitable business. I wonder who's debt those workers are paying off. Its certainly not their own.

People should really read this FT expose:

Its basically fraud.
I'm still struggling to square the circle on how Embracer got funds to acquire $8B+ in acquisitions. Quick check they raised around $1.5B, but afaik the debt being accounted on their books is only $2B. Their profits, being generous is what $2-3B over the period.

This quote from Lars really says it all;
Is there anything we as members of global society can do to change this system? It feels so hopeless.
 
Is there anything we as members of global society can do to change this system? It feels so hopeless.

Socialist gaming with huge government subsidies and tax breaks, like Kingdoms of Amalur or Skull & Bones. Or pivot video games small enough to fund mostly with art and cultural grants.

There needs to be massive legislative changes to regulatory bodies to empower them to stop mergers and acquisitions as aggressively as needed to stop these acquisitions. Intervening in the games market is an uphill battle.
 
Is there anything we as members of global society can do to change this system? It feels so hopeless.

Whats important to realise is everything here is very easy to solve.
A law being passed, regulators having more power or courts siding with regulators/government.

These capitalists/monopolists know that. The thing they fear the most is public knowledge, outrage and the consequently popular political tides turning against them.
Unforunately, politicians are pocketed by big corporations, courts can be slow to allign with the greater sentiment and regulatory capture is a thing.
Fortunately, US,UK, EU already have strong anti-trust laws in place.

The most important thing is more and more people are not only learning about the cancers of capitalism but also actively fighting it. The stock market is the last thing that is going to be changed but lower hanging fruit, like stopping predatory roll ups, preventing companies from interfering with unionisation, winning court cases on unfair practices is happening already.

Just today, the FTC has banned non-compete clauses imposed on workers in the US.

I'd say the biggest positive forces right now are:
  • support and inform on increased anti-trust enforcement
  • increase labor unionisation
  • voting for politicians or parties that will help the above
In terms of gaming, a big positive force is digital distribution. Anyone can have access to these digital stores and put their game on it.
Whereas in global physical publishing, a publisher is needed and after the cost of goods, dev cost, publisher cut and platform cut, AAA/AA independent devs are basically left with nothing. We are seeing more and more successes with independent devs, even when they are AAA.
 
I dunno why.... but the Friends name kinda makes me feel fuming lol. It is like Embracer is not taking seriously their big failure there kek.
 
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I dunno why.... but the Friends name kinda makes me feel fuming lol. It is like Embracer is not taking seriously their big failure there kek.
The people who choose this names, made probably a lot of money with this whole thing and are cheerful (and they don't care in the slightest for lost jobs or other people).
 
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