Going light, lean, and exiting Russia is a winning strategy for Embracer Group (THQQ.F -2.34%), at least judging by the initial investor reaction to it. The European video game company enjoyed a nearly 11% boost to its share price following its Thursday announcement of divestment of certain assets. That figure was well higher than the 0.1% bump of the S&P 500 index on the day.
A price tag of nearly $250 million
That morning, Embracer announced that it has finalized a deal to sell off a set of assets held by one of its business units, video game developer and publisher Saber Interactive. The buyer is Beacon Interactive, which is controlled by a Saber co-founder.
That deal, originally announced in mid-March, centers around a clutch of assets operating in Russia. Now that it has been completed, Embracer no longer operates in that country. It added that the purchase price was $247 million; this includes assumed earn out liabilities totaling $44 million. Of the former amount, $203 million will be paid in promissory notes, to be repaid in cash by this coming Dec. 31.
The seller could earn significantly more cash for the divestment. According to the terms of the sale, Embracer could be paid up to an additional $94 million if Beacon resells the purchased assets for a higher price. This is subject to certain conditions and time restraints; these were not specified by Embracer.
A win for both sides, claims Embracer
In the original announcement, Embracer quoted CEO Lars Wingefors as saying that the sale is "a win-win solution for Embracer and the parts of Saber that now will leave us."
"At the same time, we keep key companies, valuable IPs, and future publishing rights. Cash flow is immediately improved, and we remain committed to reducing net debt," he added.