THQ Nordic buys Gearbox for $363 million with $1 billion bonus clause

Gearbox, the devs behind Borderlands and the dreaded Aliens Colonial Marines, has been purchased by The Embracer Group (aka THQ Nordic).

Gearbox is now part of Embracer's massive arsenal of talent, and the acquisition is so big that Gearbox is getting their own operating division. Gearbox will sit at the head of its own table similar to Deep Silver and Saber Interactive. Right now, Gearbox leads its own internal companies--Gearbox Software, the dev team, and Gearbox Publishing, the publishing firm--but that could change as more studios are acquired.

Embracer paid $363 million upfront, of which $188 million was in cash and the remainder will be paid in 7.4 million Embracer Class B shares worth $175 million. Gearbox could earn a bonus worth up to $1 billion across a six-year timeline if it can fulfill specific sales revenue and operation targets.

Gearbox can earn $300 million ($150 million in cash, and $150 million in Class B shares vested over six years) if it completes certain projects, and that key execs remain at the company throughout the period.

The other bonus payout is pretty complex:

Financial earn out - up to USD 715 million over six-years

• Financial earn out 1: Up to USD 180 million in cash; and
• 8,926,780 B shares in Embracer, equivalent to USD 210 million, subject to the financial development of Gearbox. If the accumulated Adjusted EBITDA over four years exceeds USD 335 million, the Financial earn out 1 will be triggered and will range from USD 210 million to USD 390 million on a proportionate basis based on an accumulated Adjusted EBITDA ranging from USD 335 million to USD 621 million. If earned, the Financial earn out 1 will be payable in shares until the aggregate amount is USD 210 million and all amounts in excess of USD 210 million will be paid in cash.. If the accumulated Adjusted EBITDA is lower than USD 335 million, the financial earn out 1 is zero. If the accumulated Adjusted EBITDA is higher than USD 621 million, the financial earn out is capped at USD 390 million.

• Financial earn out 2: Up to USD 325 million in cash, subject to the financial development of Gearbox. If the accumulated Adjusted EBITDA over six years exceeds USD 702 million, the Financial earn out 2 will be triggered and will range from USD 175 million to USD 325 million on a proportionate basis based on an accumulated Adjusted EBITDA ranging from USD 702 million to USD 1,304 million. If the accumulated Adjusted EBITDA is lower than USD 702 million, the financial earn out 2 is zero. If the accumulated Adjusted EBITDA is higher than USD 1,304 million, the financial earn out is capped at USD 325 million.