Frisco-Based Gearbox Acquired by Embracer Group in $1.3B Deal

The merger adds "rocket fuel" to Gearbox’s creative engine to accelerate growth. Its 550 employees will join Embracer Group's global family of game developers and publishers.

Gearbox founder Randy Pitchford launched the company in 1999, It's getting bought by global games giant Embracer.

Frisco-based Gearbox Entertainment will join Embracer Group as a wholly-owned subsidiary, the companies announced today. Employee-owned Gearbox, which was founded in 1999, is being acquired by the Swedish-based global games giant in a transaction worth up to $1.3 billion.

Gearbox Entertainment—known for the creation of the Borderlands and Brothers in Arms franchises and a portfolio of award-winning gaming franchises such as Half-Life, Hawk’s Pro Skater, 007 James Bond, and Halo—will become Embracer Group’s seventh operating group.

In about two decades, Gearbox Software has developed more than 20 game titles and sold hundreds of millions in units. Gearbox also recently expanded operations into film and television. Current projects under development are a feature film based on the Duke Nukem property, a Borderlands movie in collaboration with Lionsgate, and a TV series based on the Brothers in Arms franchise.

The deal, which is described as a merger, adds “rocket fuel” to Gearbox’s creative engine with access to capital that lets the company make more games to accelerate its growth, the companies said in a news release.

It makes Gearbox a “significant part” of the Embracer Group, which also offers cross-studio collaboration possibilities with Embracer’s 57 internal game development studios.

Employee-owned Gearbox exits in merger with Embracer

Gearbox’s 550 team members in Frisco, Texas, and Quebec City will join with Embracer’s global team of 5,500 around the world. The Triple-A studio brings with it a robust IP catalog, development studios, and North American publishing capabilities. 

Gearbox founder and CEO Randy Pitchford, who was recently called the “magic behind Gearbox’s merger with Embracer Group” in VentureBeat, will remain at the helm in his current role. Gearbox is fully owned by Pitchford and its employees, according to Embracer.  

“The feeling at Gearbox is that we are just getting started and this transaction is not merely a stimulant for the talent of our employee-owned company, but a propellent for the exciting future we have planned,” Pitchford said in a statement. 

Gearbox accelerates its growth plan

Pitchford lauds Embracer Group Founder and CEO Lars Wingefors as an allied partner. He credits the global giant’s commitment to “fueling and accelerating the ambitions of a series of decentralized, successful entrepreneurial companies while magnifying the collective value and advantages of diversification across the entire group.”

Embracer Group Founder and CEO Lars Wingefors [Photo: Courtesy of Embracer Group]

Embracer Group Founder and CEO Lars Wingefors [Photo: Courtesy of Embracer Group]

Pitchford hails Wingefors strategy and design “for short, medium, and long-term success in the industry” as the most brilliant he’s encountered in some 30 years in the game business. 

The Gearbox plan for immediate and long-term growth includes the expansion of talent at both studios, as well as the creation of new Gearbox studios and expanded partnerships, according to the statement. The merger allows Gearbox to “do more with its existing brands, create new brands, and, potentially, undertake the merger and acquisition of other successful industry and industry-adjacent entities and properties.”

“Gearbox is arguably one of the most creative and valuable independent developers in the world,” Embracer founder and CEO Wingefors said in a statement. “We believe that the resources offered by Embracer will position Gearbox for significant growth in the years to come.”

Embracer buys Gearbox for $188 million in cash and $175 million in stock

Embracer Group bought Gearbox for $363 million in cash and shares in Embracer ($188 million in cash and $175 million in stock) with a commitment for an additional $1 billion over six years if financial and operational targets are met. Gearbox is expected to be consolidated into Embracer Group after the transaction is completed within three months.

Per Embracer, Gearbox’s net sales in 2019 totaled $125 million. In 2020, it netted $123 million in the nine-month period ending Sept. 30.

The Gearbox deal is one of a three-company acquisition by Embracer that includes Cyprus-based Easybrain and Austin-based Aspyr Media, the Dallas Morning News reports. Together, the transactions could reach some $2.5 billion in value in the next few years, it writes.

In November, Embracer Group acquired 12 game studios and a PR-influencer agency, Venturebeat reported. At the time, Wingefors said the company was talking to more than 100 entrepreneurs “who want to be part of the Embracer family.”

Per Embracer, Ernst & Young AB provided transaction support and Baker McKenzie acted as legal counsel to Embracer in the transaction. Juno Capital Partners and Union Square Advisors served as financial advisors and Fenwick & West acted as legal counsel to Gearbox.

More financial details can be found in Embracer Group’s announcement.

The story was updated with additional background and financial details on Feb. 4, 2021, at 10:10 a.m. Photos of the two CEOs were added at 3:00 p.m.

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