Embracer Group acquires A Thinking Ape Entertainment
Embracer Group AB (“Embracer”), through its wholly owned subsidiary DECA Games[1], has today entered into an agreement to acquire 100 percent of the shares in the Canada-based A Thinking Ape Entertainment Ltd. (“A Thinking Ape”). Founded in 2008 and based in Vancouver, A Thinking Ape is a developer of mobile Free-to-Play (FTP) games with a social core. The day one purchase price amounts to approximately MUSD 31 equivalent to MUSD 28 on a cash and debt free basis and is paid in cash and newly issued Embracer B shares plus additional consideration over 10 years, subject to fulfilment of agreed financial milestones, of a maximum MUSD 74.
“A Thinking Ape is one of the most respected mobile game studios in the industry. They’ve been successful for over a decade and we believe they are on the cusp of stepping up to an even bigger level. I’m delighted to join forces with Kenshi and the rest of his team” says Ken Go, Founder and CEO, DECA Games.
Background and rationale
A Thinking Ape is a Canadian mobile Free-to-Play game development studio, founded in 2008 by Kenshi Arasaki (CEO), Wilkins Chung and Eric Diep. A Thinking Ape started off in California, USA, as a chat-platform with the desire to build engaging communities online. In 2010, A Thinking Ape relocated to Vancouver, an active hub for game development in Canada. A Thinking Ape has since grown into a game development studio building mobile games with a social core. The team today consists of 82 people with a unique and diverse set of backgrounds who together have developed mobile game titles like Party in My Dorm, Kingdoms at War, Casino X and Kingdom of Heckfire, all four constituting owned IPs.
The community focus is present in every part of A Thinking Ape’s operations, with all current titles being characterized by a social dimension at their core. Through its communities, A Thinking Ape has established a committed player-base and great longevity for its mobile games. As a result, one third of all Daily Active Customer accounts have been active for more than three years. The title Party in My Dorm, a college life roleplaying game first released in 2010, achieved all time high revenues ten years after its initial release, and has a player audience that is primarily female. The title Kingdoms of Heckfire, a 4X kingdom builder strategy game, has a player audience that is primarily male, and has achieved impressive per-user monetization, often exceeding USD 2.00 ARPDAU. With a diversified player audience, A Thinking Ape’s mobile games titles have generated lifetime revenues of MUSD 190 and over 30 million accounts have been created to date.
The acquisition marks an important milestone as the first extension of the new DECA operating unit, creating a full-scale mobile and FTP operation with expertise across IP origination, development, User Acquisition (“UA”) and Live operations (“Live Ops”). With four original IPs and renewed game titles, A Thinking Ape brings an engaged player community as well as development and UA capabilities in FTP mobile games into the operating unit and complements DECA’s portfolio of mobile game IPs. Cooperating with DECA will provide Live Ops expertise and competence to enable for A thinking Ape to realize additional potential and accelerate organic growth.
As part of the Embracer Group, A Thinking Ape will operate as an independent studio within the DECA operating unit with continued focus on Free-to-Play games. A Thinking Ape will significantly strengthen the UA capabilities of the new DECA operating group as well as adding additional high quality development talent within the mobile FTP games segment. A Thinking Ape strengthens Embracer Group’s presence in the vibrant Canadian developer scene and provides a platform for expansion in Canada going forward.
“Today, A Thinking Ape becomes part of Embracer and joins the ranks of a wonderful group of entrepreneurs. I have been continually impressed by the sheer scope of Embracer’s ambition and strategy, and we look forward to helping build out an enduring and long-term mobile free to play organization” says Kenshi Arasaki, Co-founder and CEO A Thinking Ape Entertainment.
Purchase Price and Lock-Up Period
The day on purchase price of MUSD 31 equivalent to MUSD 28 on a cash and debt free basis is paid with up to MUSD 20 cash and MUSD 11 is paid with up to approximately 545,000 newly issued Embracer B shares issued at closing (the “Closing Consideration Shares”). The Closing Consideration Shares will be subject to a two-year lock-up period.
The additional consideration that may be payable by Embracer, a maximum of MUSD 74, is paid with up to MUSD 32.5 in cash and up to MUSD 41.5 is paid with approximately 2,060,000 newly issued Embracer B shares that will be issued upon hitting agreed financial metrics. In order to achieve the full additional consideration the accumulated EBIT during the upcoming 10 years need to exceed MUSD 200.
The Embracer B Shares are issued at a price of SEK 174.06 per share which equals the 20 trading day volume weighted average price of Embracer B shares on Nasdaq First North Growth Market up to and including 17 November 2020, and using the average FX rate USD/SEK for seven trading days up to and including 17 November 2020, 8.6311.
Completion of the transaction
The transaction is planned to close in February 2021 subject to customary conditions including foreign investment approval.
[1] Acquired through Embracer’s wholly owned subsidiary Embracer Lager Group AB 1 and will be part of DECA Games operating unit.
