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Post by Dan @ 08:18am 24/01/13 | 19 Comments
As THQ's bankruptcy court proceedings wrap up, reports on the successful suitors for the company's individual assets are filing in, indicating that the pieces of the embattled publisher will be going their separate ways.

Polygon is reporting on various tweets from THQ staff, and an alleged internal email sent by THQ's CEO and President Brian Farrell and Jason Rubin, which appear to corroborate the stronger rumours that have been circulating. However, as all deals are subject to final court approval, all should still be considered tentative at this point (via Polygon):
Under the proposed sales Sega will purchase Relic, Koch Media will purchase Volition and Metro: Last Light, Crytek will purchase Homefront, Take 2 will purchase Evolve and Ubisoft will purchase Montreal and South Park, according to the letter provided to Polygon from former employees.

Some assets, including THQ's publishing businesses and Vigil, along with some unnamed intellectual properties, are not included in the sale agreement. THQ officials said they're still trying to find buyers for those.

Once approved, the sales are expected to close this week.

While Farrell and Rubin were careful to note that they couldn't make any promises, they wrote that they expect most employees of the entities included in the sale will be offered employment by the new owners.

"However, we cannot say what these owners may intend, and there will likely be some positions that will not be needed under the new ownership," according to the letter. "You should receive notice this week or early next week if the new owners intend to extend employment to you.

"If you are an employee of an entity that is not included in the sale, we regret that your position will end."
All of these developments will no doubt prove very interesting as the various projects continue development.

At a glance, SEGA seems like a good fit for Relic, who will hopefully treat the Company of Heroes 2 developer in the same manner as The Creative Assembly and continue their strong PC support. Assuming he sticks around, THQ Montreal's acquisition by Ubisoft will see former Assassin's Creed head Patrice Desilets brought back into the fold, and bolster the French publisher's already huge Quebecois presence. Given South Park: The Stick of Truth is seemingly close to completion at Obsidian, not much is expected to change there, but for better or worse probably means UPlay integration.

Take 2 picking up the rights to Turtle Rock's Evolve should also prove to be a safe place for the Left 4 Dead developer's intriguing new co-op shooter, and Crytek securing Homefront means they'll have complete creative control over the sequel currently in the works at Timesplitters creators Crytek UK, which can surely only be a good thing.

Volition going to Koch Media is probably the biggest surprise, given the comparative scale of the company best known recently for Dead Island. So that's a bit of a wildcard for the future of Saints Row, but 4A Games' Metro: Last Light should make it through their distribution channel unscathed.

The uncertainty of Vigil Games is disappointing, as there is clearly plenty of talent at the Darksiders developer, but at least the abundance of other studios in Austin Texas should allow many to find a new home.

Our condolences and best wishes go out to all that have lost their employment or been otherwise uprooted by these developments.


Latest Comments
Posted 08:42am 24/1/13
So glad to see Relic go to a good home. If SEGA treat Relic like they do Creative, this can only mean good things. Sad to see Vigil not get a home. Was really hoping for more Darksiders. Though, they may end up somewhere.
Posted 09:37am 24/1/13
Wowie, that's a bit of a blow to a number of fairly key studios. I'd forgotten what THQ had in their portfolio.
Best of luck to those 'transitioning' to new endeavours.

Here's hoping Sega do good things with Relic too, that seems like an epic acquisition for them.
Posted 09:44am 24/1/13
+1 to Relic and Sega.
Posted 10:03am 24/1/13
darn, hopefully someone picks up vigil so we can get darksiders 3, series will leave me hanging otherwise.
Nerf Lord
Posted 10:06am 24/1/13
How did these guys go broke if they have all these titles worth money and all these employees who it is profitable to keep around?
Posted 10:13am 24/1/13
Nerf, that is what I want answered by ausgamers too. I could Google it, but that isn't QGL forums.
Posted 10:25am 24/1/13
Massive amounts of debt and no cash to pay it.
Steve Farrelly
Posted 10:31am 24/1/13
Mismanagement and a lack of priorities in the right areas.

THQ had great intentions in their push for only core-based, original IPs, but there appeared to be an all-round lack of direction.
Posted 03:16pm 24/1/13
eww SEGA.

good luck to anyone that tries to upload COH vids to yt now.
Posted 06:51pm 24/1/13
How did these guys go broke if they have all these titles worth money and all these employees who it is profitable to keep around?

It wasn't profitable.

THQ posted net losses of $242.5m in 2012, $136.1m in 2011, $9.0m in 2010 and $431.1m in 2009 (USD; year ended 31 Mar).

Its failure to generate profits and hence cashflow, combined with its inabilty to raise further capital, caused it to default on its obligations to creditors putting it on the verge of bankruptcy. Its plans to restructure under chapter 11 bankruptcy legislation were rejected by its creditors leading to the piecemeal sale that recently occurred. That's the abridged version, anyway.
Posted 05:20pm 24/1/13
That certainly puts the 5 million-ish dollars it raised through the Humble THQ Bundle into perspective.

all these employees who it is profitable to keep around

Keeping employees around doesn't generate profit, payroll is a liability. The fire sales of THQ titles they kept having in the last few months were basically to keep the lights on until they could figure something out.
Nerf Lord
Posted 05:28pm 24/1/13
The commentary said that most of the staff could probably expect to be kept on by the new owners of the studios, in which case, it doesn't make sense to me. If these studios are still worth money remaining structured as is, it seems like it must be better to sell the minimum IPs possible to get cash to cover the period until the next release of the most promising titles.

Basically, I have a hard time believing their claim that most of the staff can expected to be kept on - if that was worthwhile, this situation doesn't seem like it would have eventuated.
Posted 05:35pm 24/1/13
You're probably having a difficult time believing it because that kind of claim isn't very believable.
They usually say things like that so that the employees don't get spooked and bolt before the sale is completed.
Posted 06:52pm 24/1/13
The commentary said that most of the staff could probably expect to be kept on by the new owners of the studios, in which case, it doesn't make sense to me.

I would suspect that the majority of the value in THQ's former studios likely is held in its intellectual property rather than tangible assets. So in order for the acquirers to maximise the value of their acquisitions (i.e. the expected future cash flows generated by said assets) it seems logical that they would probably need to retain most of the acquired staff in order to successfully monetise these acquisitions - at least in the short term, anyway.

So the suggestion that most of THQ's former staff can expect to be kept on by their new employers is not necessarily inconsistent with THQ's unprofitable history.

There could also be an aspect of what Dazhel has suggested going on as well. Hard to know at this stage and with only publicly available information.
Nerf Lord
Posted 05:46pm 24/1/13
Yeah, I suspect many layoffs. The only other remotely plausible seeming explanation is just that THQ was gambling in something else which isn't included in these franchises being sold, or was just really really bad at managing money.
Posted 06:16pm 24/1/13
Well, they'll have to keep a decent chunk of the staff if they want to keep the formula that made the studios valuable in the first place. Its not like you could just buy Saint's Row or Company of Heroes or whatever, and fire everyone and put your own team on it and expect the game to turn out the same. A tonne of knowledge, design and technical and artistic, would be lost if they laid off too many staff.

Triple A games are f*****g expensive to make, and you're usually pouring millions upon millions of dollars into a project for years, without any returns at all, and banking on the speculation that the titles will sell well enough to make back what you've spent. I remember reading that Darksiders 2 didn't sell anywhere near as well as they hoped, and Homefront was a commercial failure as well, so their cashflow would have been hurting bigtime, lots of money going out and not enough coming in.
Nerf Lord
Posted 06:24pm 24/1/13
Yeah I understand needing the talent behind the series, it just seems strange that they wouldn't be selling off minimal assets to fund the others to completion, and couldn't get a loan if these IPs are so seemingly valuable being maintained and worked as they already were. :/

Maybe all the other studios are just taking gambles.
Posted 06:52pm 24/1/13
Yeah I understand needing the talent behind the series, it just seems strange that they wouldn't be selling off minimal assets to fund the others to completion, and couldn't get a loan if these IPs are so seemingly valuable being maintained and worked as they already were

Regarding your first point (bolded for clarity), this was probably an option the company was considering under Ch11 bankruptcy legislation but the creditors rejected it. I haven't been following the THQ saga very closely but selling off non-core assets would be something pretty much every company that enters Ch11 would consider. I would suspect they didn't want to sell assets in a distressed position prior to receiving the advantages that the cover of Ch11 bankruptcy status provides.

Regarding your second point, banks are wary of lending to highly geared companies where a significant proportion of their assets are intangible - such as games or software companies. The reason being that it is difficult for them to recover their investment if the debt becomes non-performing. Whereas a highly geared company with a large proporation of 'hard' assets, say a property group or mining company, will find it much easier to raise extra capital. It's much easier for an administrator to sell off a property portfolio than a software portfolio and the hard asset will likely retain much more of its value as compared to the intangible one. Again, they were probably waiting until Ch11 to attempt to raise further capital if this was something they were considering. Ch11 allows companies to raise capital more cheaply as they can grant new investors preferential security arrangements (probably other reasons too - I am not an expert in US bankruptcy law). But again, whatever THQ's plans were in Ch11 became irrelevant once its proposition was rejected by creditors.
Nerf Lord
Posted 06:41pm 24/1/13
Makes sense combined with Khel pointing out how long development time is, as well as some other stuff which I just read about them having some massive failures.
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