Take-Two buys Gearbox for $460 million

Take-Two Interactive has made an offer to buy Gearbox Entertainment for $460 million, and the Embracer Group has accepted the deal.

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It's official: Gearbox has a new home. Take-Two Interactive will buy Gearbox for $460 million in stock, the company has announced. Embracer Group had purchased Gearbox for $363 million, with $1 billion worth of bonuses being triggered if certain conditions were met over a period of time (they weren't). Based on the original deal terms, it looks like Embracer actually made a profit from the Gearbox sale.*

Gearbox Entertainment in its entirety is included as part of the deal, and Take-Two will now wholly own the Borderlands, Tiny Tina, and Duke Nukem franchises, along with any IPs that Gearbox owns.

Gearbox Entertainment actually has four operating units with various responsibilities:

• Gearbox Software, a creative developer of multiple original AAA game titles and franchises.
• Gearbox Publishing, the publishing unit has over the past few years established itself on the North American scene, focused on bringing titles from top independent developers to market.
• Gearbox Studios, which oversees and guides full maximization of their IPs and transmedia including the development of television, motion picture, and other related adaptations of their intellectual property.
• Gearbox Properties supports the vision of Gearbox Entertainment by guiding the collective vision, the creation growth, and strategy of Gearbox Entertainment universes, characters and products, and serves as a coordination unit for transmedia and business units for their valuable IPs.

The deal makes a ton of sense on paper. Gearbox and TTWO are close partners, and TTWO's publishing subsidiary 2K Games is the main publisher for the Borderlands franchise. There's an establish trust and mutualism between the two groups that has been built through tens of millions of game sales and hundreds of millions of dollars in revenue.

Take-Two also says that Gearbox has six projects in the works including Borderlands 4:

"Gearbox currently has six key interactive entertainment projects in various stages of development, including five sequels, two of which are from the Borderlands and Homeworld franchises, and at least one exciting new intellectual property."

*It's been widely reported that Embracer paid $1.3 billion to acquire Gearbox. This value included earn-out bonus of up to $715 million. They actually paid $363 million at once, split between $188 million in cash and $175 million in class B shares. The earn-outs weren't triggered because six years haven't passed since the buyout.

Below is comments from management about the buyout:

"Our acquisition of Gearbox is an exciting moment for Take-Two and will strengthen our industry-leading creative talent and portfolio of owned intellectual property, including the iconic Borderlands franchise," said Strauss Zelnick, Chairman and CEO of Take-Two.

"This combination enhances the financial profile of our existing projects with Gearbox and unlocks the opportunity for us to drive increased long-term growth by leveraging the full resources of Take-Two across all of Gearbox's exciting initiatives."

"With nearly 20 years of history working together, Gearbox has played an integral role in our success, given their unique ability to create interactive entertainment experiences that feature beloved characters, exciting new worlds, and humorous storytelling," added David Ismailer, President of 2K.

"We are thrilled to welcome Randy Pitchford and his team of passionate, talented developers to 2K and we look forward to releasing numerous projects in the future as colleagues. We have loved partnering with Gearbox on every iteration of the Borderlands franchise and are excited to be in active development on the next installment in the series."

Gearbox's Randy Pitchford had this to say about the deal:

"Joining forces with Take-Two Interactive/2K will help Gearbox ascend to our next level. Take-Two and 2K have demonstrated repeatedly their commitment to our engine of generating creativity, happiness, and profit. We set the bar for interactive entertainment and achieved remarkable results with groundbreaking, record-setting games when we worked together at arm's length as partners. I'm incredibly excited about what we can accomplish now that we're fully aligned as one."