Tuesday, October 23, 2018

Trion Purchased By Gamigo

I got back from Las Vegas last night and finally feel human again after scarfing down some Taco Bell for lunch. I fully intended to start my write-up of the EVE Keynote from EVE Vegas but decided to do a little web surfing first. I stopped by The Ancient Gaming Noob and, "Holy Cow!", Trion Worlds was purchased by Gamigo. All reports indicate over 80% layoffs as a result, as Gamigo immediately cut all but 25 members of Trion's workforce.

At this point I recommend reading Wilhelm's excellent piece on the buyout. He did the deep dive into the financial structure of Gamigo so I don't have to. I am going to copy/paste a required financial discloser release because I found something interesting. Your mileage may vary.

Disclosure of an inside information acc. to Article 17 MAR of the Regulation (EU) No 596/2014

gamigo AG: acquisition of Trion Worlds games company to further strengthen its market-position in the games market.

Hamburg, October 22, 2018:
gamigo AG ("gamigo Bond" WKN: A2NBH2 / ISIN: SE0011614445) has acquired major assets from Trion Worlds Inc. Trion Worlds is a leading US gaming company with offices in Redwood City (California) and Austin (Texas) and has as publisher and developer of online and console MMO-games, well-known games such as Rift, Defiance, Trove and ArcheAge in it's portfolio. The assets of the company have been acquired by gamigo's subsidiary Golden Gate Games Inc., via an "Assignment for the Benefit of the Creditors" process, in which the buyer only buys those assets, with which he wishes to continue the business.

The gamigo group has acquired the majority of the assets, including the platform, takes over employees to operate the business and gets the full publishing rights of the games. The IP's of the Trion Worlds games have been acquired by gamigo's sister company Padmapani GmbH and are made available for gamigo group, worldwide and exclusive.

It is expected that the Trion Worlds acquisition will add on gamigo group level revenues of at least USD 18 million in 2019. Depending on the speed and success of restructuring and integration, management expects an additional EBITDA of USD 1 to 4 million, based on unlocking substantial synergies and economies of scale as proven in numerous acquisitions before.

The full purchase price amounts to a low USD two-digit million amount (including possible earn-outs).

About gamigo AG:
Since its foundation in 2000, gamigo has developed into one of the leading publishers of free-to-play online and mobile games in Europe and North America. In total, the gamigo Group employs more than 250 employees at its headquarter in Hamburg and branches in Berlin, M√ľnster, Darmstadt, Cologne (Germany), Warsaw (Poland), Istanbul (Turkey), Chicago (USA) and Seoul (Korea). The company's core portfolio includes successful gaming titles such as Aura Kingdom, Desert Operations, Dragon's Prophet, Echo of Soul, Fiesta Online, Goal One, Last Chaos, Shaiya and Twin Saga. gamigo grows via organic growth as well as through acquisitions and has made over 20 acquisitions since 2013, including games, media and technology companies as well as individual game assets.


This release may contain forward-looking statements based on current assumptions and forecasts made by the management of gamigo AG or its affiliated companies. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of gamigo AG and its affiliated companies and the estimates given here. Neither gamigo AG nor its affiliated companies assume any liability to update these forward- looking statements or to adapt them to future events or developments.
Curiosity got the better of me and I decided to look up what "Assignment for the Benefit of the Creditors" actually meant. I wound up landing on the blog of a bankruptcy lawyer from California. The Gamigo purchase wasn't due to ansy investors. Instead, Trion flat out couldn't pay its bills. An Assignment for the Benefit of Creditors is the state version of Chapter 7 bankruptcy, perhaps better known as liquidation.
ABCs are a state law, rather than a federal law, concept.  They have been used in California for almost a hundred years.

In an ABC the business hires someone to liquidate the assets and distribute the proceeds to the creditors.  The business assigns the assets to that person for that purpose.  The assignee then serves as a sort of private “Chapter 7” Trustee, and has a fiduciary obligation to maximize the liquidation proceeds.

One fundamental difference between Chapter 7 liquidation and an ABC is that an ABC usually does not involve any court – state or federal.  The result is that an ABC is a more streamlined process that takes less time to complete than a Chapter 7 bankruptcy.  Thus, while the net effect is frequently the same in both processes:  the business is liquidated and ceases to exist, the time involved can be significantly less in an ABC.

Another difference is that in a Chapter 7 the creditors have very little, if any, input in the process, whereas in an ABC the creditors have to agree to the results beforehand for the process to succeed.
The other bit of information was the purchase price. We actually have a recent sale with which to compare the Trion sale. Less than two weeks ago, on 12 October, the sale of CCP Games to Pearl Abyss finalized. In that transaction, Pearl Abyss agreed to pay $225 million upfront, with up to an additional $200 million in deferred performance-based payouts. The potential $425 million deal is in start contrast to the "low USD two-digit million amount (including possible earn-outs)" quoted in the financial release announcing the buyout of Trion.

In truth, I did not play Trion games, so I can't really claim an emotional attachment to the game company. I played Rift at launch but never made it to level 25, and Defiance up to maybe level 10. But I do remember Scott Hartsman from his time working on Everquest 2 and wish him luck wherever he winds up, although I hear that is not a popular sentiment at the present time.

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