THQ Inc. will be split up after a judge gave the bankrupt video-game maker approval to sell most of its assets to multiple buyers for about $72 million, topping an offer that would have kept the company intact.
U.S. Bankruptcy Judge Mary F. Walrath in Wilmington, Delaware, yesterday approved the sales, saying “I am convinced the market has spoken and that the offers were the highest and best for the assets.”
THQ’s Relic Entertainment Inc. studio, which makes real-time strategy games including the “Company of Heroes” franchise, brought in the most at the auction held over the last two days, selling to Sega Sammy Holdings Inc. for $26.6 million.
“The total proceeds are just shy of $100 million from the auction process,” Jeffrey C. Krause, a THQ lawyer, told Walrath at the hearing. Some of the video-game maker’s assets weren’t acquired at the auction, leaving about $29 million in value at the company, Krause said.
The company’s Volition Inc. studio garnered the second highest price, selling to Koch Media GmbH, which owns the maker of the hit Zombie game “Dead Island” for about $22.3 million. Volition makes the “Saints Row” series, THQ’s best-selling title. Koch Media also purchased the rights to develop and market the unpublished titles “Metro 2033” and “Metro 2034” for about $5.9 million.
Take-Two Interactive Software Inc., the maker of the “Grand Theft Auto” series, scooped up the rights to the company’s unpublished video-game “Evolve” for about $10.9 million.
Ubisoft Entertainment SA will acquire the company’s rights to “South Park: The Stick of Truth”, a role-playing game based on the popular adult cartoon show from Matt Stone and Trey Parker, for about $3.3 million. Ubisoft, which makes the Assassin’s Creed video-game franchise, will also buy THQ Montreal Inc. for about $2.5 million. THQ Montreal is working on “1666,” an unfinished title from the Assassin’s Creed creator Patrice Desilets.
THQ sold the rights to its “Homefront” franchise to Crytek GmbH, which partnered with THQ to develop the sequel, for $544,218.
The company’s Vigil Games Inc. development studio, which produced the “Darksiders” series, didn’t sell at the auction. THQ “values the group as a whole at several million dollars,” Krause said in an interview after the hearing.
“Saints Row,” with more than 11 million units shipped globally, is THQ’s most-successful franchise, according to a May press release. The game’s third iteration, “Saints Row: The Third,” has shipped more than 5 million units, according to a transcript of the company’s Nov. 5 earnings call.
THQ said it was forced to seek bankruptcy protection after sustaining losses for the past five fiscal years. The company listed assets of $204.8 million and debt of $248.1 million when it sought court protection on Dec. 19.
The company was devastated by recent losses tied to the “uDraw” peripheral device for video-game consoles. While the device that lets users reproduce their drawings on their television had early success on Nintendo Co.’s Wii console, the versions for Sony Corp.’s PlayStation 3 and Microsoft Corp.’s Xbox 360 struggled to gain traction and “fell far short of expectations,” according to court documents.
THQ entered bankruptcy with a deal to sell itself as a whole to Clearlake Capital Group LP in a deal then valued at about $60 million. Clearlake’s opening offer at the auction was valued at $42.9 million, Krause said at the hearing.
The video-game maker wanted to hold an auction with Clearlake’s offer as the lead bid 21 days after entering bankruptcy protection, a proposal that drew criticism from creditors. The creditors argued the timeframe was too fast to give prospective buyers a realistic opportunity to evaluate the assets.
Walrath denied that request earlier this month, forcing THQ to reach a compromise that extended the process by about two weeks and allowed for “piecemeal bids” for individual assets and video-game titles, a change creditors were pushing.
“Our goal was to have a robust auction” and “we were certain that allowing piecemeal bids would maximize value,” a lawyer for creditors, Paul N. Silverstein, said at the hearing. “The auction was a success and piecemeal bidding was key to that success,” he added.
While Walrath said she was “glad the process resulted in more money for creditors,” the judge was told that the sales will likely cost some workers their jobs at the acquired studios, and undoubtedly at those that weren’t. The company will work with the unsecured creditors committee to negotiate “a settlement” for terminated workers’ claims, Krause told the judge.
The case is In re THQ Inc., 12-13398, U.S. Bankruptcy Court, District of Delaware (Wilmington).