Video game group Embracer plans another spin-off after Q4 profit beat
Embracer Group Announces Strategic Spin-Off Following Strong Financial Results
By Vera Dvorakova
May 20 (Reuters) - Embracer is planning another split into two listed companies, it said on Wednesday, after the Swedish video game group's quarterly operating profit beat analysts' expectations.
Details of the New Spin-Off
The Tomb Raider franchise owner, fresh out of last year's three-way split, said it planned to spin off Fellowship Entertainment with a listing on Nasdaq Stockholm in 2027.
Industry Context and Business Model Shifts
The gaming industry has been rethinking business models and focusing more on intellectual property (IP) since the strong pandemic-driven growth tapered off.
Fellowship Entertainment's Focus
Fellowship will be an "IP-led entertainment company" focused on development, publishing and licensing, Embracer said. Licensing, building on Middle Earth Enterprises, will be "at the heart" of the business, CEO Phil Rogers told Reuters.
Embracer's Post-Spin-Off Strategy
Embracer, meanwhile, will position itself as a streamlined home for creators, with tighter cost control and a focus on profits and selective deals to boost shareholder returns.
Rationale Behind the Spin-Off
"The main rationale to spin-off Fellowship is to increase management focus to capture the full joint potential of the IPs, their respective communities and some of the best game developers in the world," Embracer chairman and largest shareholder Lars Wingefors said in a letter to shareholders.
Key Assets and Leadership Changes
Major IPs and Business Focus
Fellowship will house the group's largest IPs, including The Lord of the Rings, Tomb Raider and Kingdom Come: Deliverance. Embracer will focus on niches, such as retro gaming and physical distribution of games.
Executive Movements
Embracer CEO Rogers, Chief Financial Officer Müge Bouillon and Chief Operating Officer Lee Guinchard will move to the same roles at Fellowship. Bouillon has also been appointed the deputy CEO of Embracer Group until the spin-off. Embracer has started recruitment for a new CEO and CFO.
Financial Performance and Market Reaction
Quarterly Results and Share Buyback
It reported adjusted earnings before interest and taxes of 360 million Swedish crowns ($38.3 million) for its fiscal fourth quarter, nearly 100 million above analysts' consensus. It also announced a share buyback programme of up to 750 million crowns.
Future Financial Outlook
Embracer expects its cash EBIT, a new reporting metric, to be at least 1 billion crowns in the 2026/27 financial year. SpareBank 1 Markets estimated that this would put the adjusted EBIT forecast about 20% below consensus.
Stock Market Response
Embracer's shares rose as much as 9% in early trading, before changing course to trade 1.5% lower by 0910 GMT.
($1 = 9.4105 Swedish crowns)
(Reporting by Vera Dvorakova in Gdansk; Editing by Milla Nissi-Prussak)
