THQ is no more: the bankrupt publisher and developer auctioned off its assets in U.S. Bankruptcy Court today. Though the court must still approve the sales, a letter from THQ's CEO (which was passed to Kotaku by an employee) reveals the bidders, which include Sega, Ubisoft, Deep Silver, Crytek, and Take-Two, and the THQ franchises and studios they'll acquire. Below is a breakdown of who's getting what, and what led to today's sale.
Who's getting what? Based on what we know right now...
Company of Heroes and Warhammer 40,000 developer Relic Entertainment is going to Sega.
Saints Row developer Volition, Inc. and the Metro series are going to Koch Media (Deep Silver).
The Homefront franchise is going to Crytek.
THQ Montreal and the South Park license are going to Ubisoft.
Evolve, a game in development by Turtle Rock Studios (which worked on Left 4 Dead), is going to Take-Two Interactive. THQ will "make every effort to find appropriate buyers" for its remaining assets, such as Darksiders developer Vigil Games.
On November 13, 2012, THQ announced that it had defaulted on a $50 million loan. Its subsequent Humble THQ Bundle raised about $5 million for THQ, charities, and the Humble Bundle organizers, but it wasn't enough: the company filed for Chapter 11 bankruptcy on December 19th.
Bankruptcy isn't necessarily the end—Chapter 11 allows the debtor to stay in control of the company under court oversight—but things didn't go as planned. THQ expected to sell itself in whole to a private equity firm called Clearlake Capital Group, but THQ's creditors and the bankruptcy court rejected that proposal earlier this month, which led to today's piece by piece auction.
We're heading towards the conclusion of THQ's ongoing bankruptcy saga. After the publisher's creditors raised objections over its hoped-for quick sale - objections which were upheld by a US judge - details are emerging about how that sale will eventually go down.
THQ had hoped to sell themselves as a whole, ensuring the company could exist as-is under a new owner. That's now not going to happen, after it was decided that a wholesale attempt would fetch less money than dividing the company up and selling each franchise separately. A tweet by the Distressed Debt Investing blog confirms this move, saying "The auction will allow for piecemeal ("title by title") sales of THQ assets"
DDI's latest blog update on the THQ case explains how the sale will work. THQ's properties will be auctioned off on January 22nd, with both titles and studios up for grabs. So far EA and Warner Brothers have been revealed as interested parties, although it's not known which titles they're eyeing up.
Also unclear is how this arrangement will affect THQ's upcoming games. Company of Heroes 2, Metro: Last Light and South Park: The Stick of Truth all seem close enough to completion that a prospective buyer would almost certainly want them released and making money. The status of their other projects - like Volition's Saints Row 4 - may be less secure. This is assuming the auction will keep each developer with their respective games, which itself is far from certain.
We should start to finally get some solid details come the sale hearing on January 23rd. In the meantime, wild speculation! Where would you like to see THQ's many great franchises end up?
Last week we brought news that THQ's hopeful quick sale to the equity firm Clearlake was in trouble, following objections raised by a US Trustee and the publisher's own creditors. Today, a US judge has upheld those objections, saying the proposed sale process hasn't given potential buyers enough time to make a bid.
The Clearlake sale was scheduled to complete this week, but US bankruptcy judge Mary F. Walrath has found in favour of the creditors, noting that the aggressive timetable had pushed out other interested parties. "I have problems concluding that the pre-petition sale process was fulsome," she said, finding problem with the way THQ "did not even put out to the public that it was for sale" until after Clearlake had signed a non-disclosure agreement over the deal.
Walrath cited 10 possible buyers that had contacted THQ following its bankruptcy, saying this was evidence that the publisher wasn't doing everything it could to maximise the sale price. She also queried THQ's desire to be sold wholesale, saying "individual titles may have substantial value," and adding that the requirement to purchase the company in its entirety "may depress bids." Despite these concerns, as yet no ruling has been made on whether this requirement will also be blocked.
On THQ's part, the company is claiming it wanted the quick sale to fund the $37.5 million bankruptcy loan it's looking to take out, which would need to be paid by the 15th January. The judge dismissed this, saying "I am not convinced that we are under the gun to have a sale process by the 15th."
The revised date for the sale of THQ has yet to be decided, although the creditors are looking for a three week extension to the process.
Last month THQ declared bankruptcy and announced plans to sell to the equity firm Clearlake Capital. It was a troubling development for the struggling publisher, but if the sale goes as planned, it will mean they could potentially continue to operate, without the need for staff cuts or game closures. Unfortunately, the sale may not go as planned.
Distressed Debt Investing report that two objections have been filled in the case. The first, raised by the US Trustee overseeing the bankruptcy, is... complicated. Essentially her complaint is that the short timing of the sale and high reimbursement rate unfairly benefit Clearlake. The proposed sale hearing of January 10 and $2.25 million due to Clearlake if another company won the bid essentially block other interested parties from participating.
The second objection was raised by THQ's own creditors, and its motivations are far more obvious. Their problem with the sale is the way THQ management have arranged the terms to favour keeping jobs and ensuring the company's future over debt payments. Standard bankruptcy practice is to chop the company into little bits and sell each one piecemeal. THQ's terms ensure the company would be bought as a whole. Which sounds like a good thing, but it doesn't let the money-men maximise their profits, so obviously it must be bad.
"Taken as a whole, the bidding procedures are designed specifically to ensure that Clearlake is the successful bidder and that the Debtors' business will continue as a 'going concern,' whether or not such outcome would be in the best interests of the Debtors' unsecured creditors and/or maximize the value of the Debtors' estates," the committee of note holders stated.
The court hearing on bidding procedures is scheduled for tomorrow.
THQ's global communications boss Huw Beynon recently spoke to OXM about Metro: Last Light's post-apocalyptic appeal and handsome Russian mutants. Benyon's thoughts eventually expanded to a criticism of the rut he believes the FPS genre has wallowed in for years. Specifically, he calls out Call of Duty's rinse-repeat military formula for "stamping out" other creative shooter ideas.
"I think it's probably very true to say that there's reaction to what used to be a small subset of the genre of a military shooter," he said. "It's ballooned and mushroom-clouded to almost define the genre and kind of stamp out memories of what I remember being great about first person shooters, whether that was Half-Life, System Shock, or GoldenEye—where a FPS didn't necessarily have to involve military material, it just meant an invitation to a fantastic other world, which to me was always the point of video games in the first place."
Beynon also suggested gamers are slowly detaching themselves from the idea of always playing as a military superman, and that gamers are hungry for different experiences—like Metro. He also points to Dishonored as a successful experiment. "I've hugely enjoyed and I'm thrilled that they've had success with that—it's probably the game that's interested me most this year and am glad to see it get the critical and hopefully commercial success that it deserves."
THQ filed for bankruptcy earlier this week but continues to keep its publishing duties and upcoming releases active. Elsewhere and earlier on, Black Ops 2 raked in gobs of profit, but not quite as many as its big brother, Modern Warfare.
In a statement released today, THQ announced it filed bankruptcy as part of a sale to equity firm Clearlake Capital. Though financial issues troubled the publisher in the past, the announcement stressed everything will continue as normal while THQ seeks a new owner.
"THQ will continue operating its business without interruption during the sale period," read the statement. "All of the company’s studios remain open, and all development teams continue. Consumers and retailers should see no changes while the company completes a sale. The new financing will support business operations throughout the period. THQ does not intend to reduce its workforce as a result of the filing."
THQ's filing specifically fell under Chapter 11 of the government's Bankruptcy Code, which allows a company to reorganize and essentially get its bearings without disappearing entirely. Which is a good thing, with upcoming games such as Metro: Last Light, Company of Heroes 2, South Park: The Stick of Truth, and Saints Row 4 hanging in the balance.
On a positive note, THQ's substantial success generating over $5 million through its recent Humble Bundle deal boosted its stock nearly 40 percent!
The Ranger difficulty for Metro 2033 (PSA: free keys are being given away on Facebook) stripped the UI, crosshairs, and health while making precious ammo even more scarce in Russia's monster-infested tunnels. Such a masochist's dream come true degree of challenge will reappear in Metro: Last Light, but only as part of a deal for those pre-ordering the $60/£37 Limited Edition.
Early buyers also receive an extra bandolier of military-grade ammo for barter or blasting and a modified AKS-74U rifle. Ranger was also previously packaged separately as free DLC for Metro 2033, so THQ will probably follow suit for Last Light. To some, Ranger might represent the "best" experience of a harsh, barely survivable world, but at least the pre-order is the same price as the launch version, and will probably be available to everyone after release.
Everything sounds so much more bleak when it's being narrated by a despondent Russian. This new Metro: Last Light footage could have been showing a day out at the circus, and the voiceover would still give it the sombre tone of a slowly dying civilisation.
Bad example, thinking about it. Circuses are usually pretty harrowing as is.
Instead we get a moody and atmospheric tour of Metro's decrepit cityscapes and squalid tunnels, all while our cheery friend gives a sermon from the book of Genesis, complete with an extra line that I'm pretty sure isn't church-approved.
It all looks suitably true to the melancholy of the first game. Metro 2033 was a brilliant way to have a bad time and, if you never tried it out, is still available from the Humble THQ Bundle for the next day and a bit. Metro: Last Light is due out in March 2013.
Update: Ooh! As Hitman Dead Man and GinjaNinja32 point out in the comments, THQ are also handing out free Steam keys for Metro 2033 for folks who like their Facebook page. At least, they will when the currently overloaded page comes back online.
THQ's previously reported financial difficulties continue with the resignation of CFO Paul Pucino, who leaves no named successor in the wings. However, there are some glimmers of light on the horizon for the troubled publisher, which reports that it's in negotiations with an unidentified financial sponsor (expected to result in a "significant and material dilution to shareholders").
It's also established a "forbearance agreement" with the bank Wells Fargo, which essentially allows THQ extra time to catch up on its debts - until January 15 in this case.
"This agreement enables us to continue focusing on bringing our games in development to market," said THQ's CEO Brian Farrell. "Meanwhile, we are evaluating financial alternatives that will transition the company into its next phase."
With Company of Heroes 2 looking very special indeed, and other promising titles like Metro: Last Light trundling toward release, we're keeping our fingers crossed that THQ manages to climb out of this financial hole.
THQ's stock has halved in value after the publisher's Q2 financial report announced a delay to the games arriving early next year. Though the delay shows an investment in the quality of those titles, the plummeting share price could leave the company facing bankruptcy before they reach market.
Needless to say, this would be a tremendous shame, as many of the games on THQ's roster are very well-liked here at PCG. Metro: Last Light and Company of Heroes 2 look particularly promising, and later releases, like Crytek's take on the Homefront licence and a new Saints Row game should do a lot to chivvy up sales - assuming THQ can find the cash to fund their development. Then there's Darksiders - which I rather enjoyed despite its weak-sauce PC porting - but the last game hasn't made its money back, despite 1.4 million sales.
As such THQ faces a tough call: gamble money it doesn't have to fund and polish its forthcoming projects or jeopardise the quality of its titles and face diminishing returns. There are other options of course, though not especially welcome ones: a mergers and acquisitions consultant has apparently been hired, presumably to look at the possibility of a buy-out.
If THQ can last out a little longer, then the sales of Metro: Last Light and Company of Heroes 2 may well make or break the company. If you're looking forward to those games, it might be worth considering this fact should you find yourself with pre-order-shaped wad of cash come Christmas-time.