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Execution of Share Transfer Agreement with Change to Subsidiaries (Divestiture of Select Overseas Studios & IP)

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TOKYO, May 02, 2022--(BUSINESS WIRE)--SQUARE ENIX HOLDINGS CO., LTD. (the "Company") today signed a share transfer agreement with Sweden-based Embracer Group AB concerning the divestiture of select overseas studios and IP (the "Transaction"). The Company’s primary assets to be divested in the Transaction are group subsidiaries such as CRYSTAL DYNAMICS, INC.; EIDOS INTERACTIVE CORP. and IP such as TOMB RAIDER, Deus Ex, Thief, and Legacy of Kain. At the Company Board of Directors meeting held on 27 April, 2022, the Board resolved to entrust Representative Director Yosuke Matsuda with the right of final decision. All conditions having being met, the share transfer agreement was concluded today.

1. Purpose of the Transaction
The Transaction will assist the Company in adapting to the changes underway in the global business environment by establishing a more efficient allocation of resources, which will enhance corporate value by accelerating growth in the Company’s core businesses in the digital entertainment domain. In addition, the Transaction enables the launch of new businesses by moving forward with investments in fields including blockchain, AI, and the cloud. The move is based on the policy of business structure optimization that the Company set forth under the medium-term business strategy unveiled on May 13, 2021.

The Transaction will also provide an opportunity to better align our overseas publishing function with our organization in Tokyo, revisit the current governance structure and associated reporting lines, and advance integrated group management with the goal of maximizing the worldwide revenue generated from future titles launched by the group’s studios in Japan and abroad.

Going forward, the Company’s development function will comprise its studios in Japan, Square Enix External Studios, and Square Enix Collective. The Company’s overseas studios will continue to publish franchises such as JUST CAUSE, OUTRIDERS, and Life is Strange.

2.

Primary companies, IP to be divested

a.

Primary companies to be divested

(1)

Company name

CRYSTAL DYNAMICS, INC.

(2)

Headquartered

1400A Seaport Boulevard, Suite 300 Redwood City, California 94063 USA

(3)

Name and title of representative

Rogers Philip Timo, Director

(4)

Business description

Planning and development of entertainment products

(5)

Stated capital

US$40 million

(6)

Established

July 8, 1992

(7)

Major shareholder & shareholding ratio

Eidos, Inc., 100%

(8)

Relationships between parties

Capital relationship

The Company indirectly owns 100% of the shares outstanding in Crystal Dynamics, Inc.

Personal relationship

Not applicable

Business relationship

Plans and develops content for publication by group subsidiaries

Applicability to related parties

Crystal Dynamics, Inc. is a third-generation subsidiary of the Company.

(9)

Business and financial performance over the most recent three years (USD$’000)

Fiscal year

March 2019

March 2020

March 2021

Total equity

(144)

2,410

5,750

Total assets

19,000

17,927

22,889

Equity per share (USD$)

(1.44)

24.10

57.50

Revenue

66,923

81,144

92,277

Operating income

2,856

3,465

3,876

Ordinary income

2,202

2,681

3,592

Net income

2,148

2,554

3,340

Earnings per share

(USD$)

21.48

25.54

33.40

Dividend per share

(USD$)

(1)

Company name

EIDOS INTERACTIVE CORP.

(2)

Location

400 De Maisonneuve Boulevard West, 6th Floor, Montreal QC H3A 1L4, Canada

(3)

Name and title of representative

Rogers Philip Timo, Director

(4)

Business description

Planning and development of entertainment products

(Development studios: Eidos-Montréal, Square Enix Montréal)

(5)

Stated capital

CAN$6.2 million

(6)

Established

March 5, 2007

(7)

Major shareholder & shareholding ratio

Square Enix Ltd., 100%

(8)

Relationships between parties

Capital relationship

The Company indirectly owns 100% of the shares outstanding in Eidos Interactive Corp.

Personal relationship

Not applicable

Business relationship

Plans and develops content for publication by group subsidiaries.

Applicability to related parties

EIDOS INTERACTIVE CORP. is a second-generation subsidiary of the Company.

(9)

Business and financial performance over the most recent three years (CAN$’000)

Fiscal year

March 2019

March 2020

March 2021

Total equity

28,491

29,550

30,198

Total assets

64,841

96,484

88,373

Equity per share (CAN$)

45.95

47.66

48.71

Revenue

73,203

75,635

99,857

Operating income

2,963

3,270

4,079

Ordinary income

3,112

1,954

3,072

Net income

5,318

1,059

647

Earnings per share

(CAN$)

8.58

1.71

1.04

Dividend per share

(CAN$)

b.

Primary IP to be divested

TOMB RAIDER, Deus Ex, Thief, and Legacy of Kain franchises, among others

3.

Profile of counterparty to the Stock Transfer

(1)

Company name

Embracer Group AB

(2)

Headquartered

Älvgatan 1 Karlstad Sweden

(3)

Name and title of representative

Lars Wingefors, Co-founder & Group CEO

(4)

Business description

Embracer Group is the parent company of businesses developing and publishing PC, console, mobile and board games and other related media for the global gaming and entertainment market

(5)

Stated capital

1.3 million Swedish Krone

(6)

Established

2011

(7)

Total equity

27,165 million Swedish Krone (as of end-March 2021)

(8)

Total assets

33,752 million Swedish Krone (as of end-March 2021)

(9)

Major shareholder & shareholding ratio

(as of end-March 2021)

Lars Wingefors AB

28.39%

S3D Media Inc.

9.07%

Swedbank Robur Fonder

5.94%

Canada Pension Plan Investment Board

5.94%

(10)

Relationships between parties

Capital relationship

Not applicable

Personal relationship

Not applicable

Business relationship

Not applicable

Applicability to related parties

Not applicable

4.

Number of shares to be transferred, number of shares owned and ratio of voting rights before and after the transfer

Company Name

CRYSTAL DYNAMICS,INC.

EIDOS INTERACTIVE CORP.

(1)

Number of shares owned before transfer

100,000 shares

(Number of voting rights: 100,000)

(Ratio of voting rights: 100%)

620,000 shares

(Number of voting rights: 620,000)

(Ratio of voting rights: 100%)

(2)

Number of shares to be transferred

100,000 shares

(Number of voting rights: 100,000)

620,000 shares

(Number of voting rights: 620,000)

(3)

Number of shares after transfer

- shares

(Number of voting rights: -)

(Ratio of voting rights: -%)

- shares

(Number of voting rights: -)

(Ratio of voting rights: -%)

*The transfer price is $US 300mil.

5. Transaction schedule

Board of Directors resolution (*1)

April 27, 2022

Conclusion of share transfer agreement

May 2, 2022

Date of share transfer(*2)

Expected to be complete during July and September, 2022.

*1: The Company Board of Directors resolved to entrust the final approval of the Transaction to Company Representative Director Yosuke Matsuda.

*2: The transaction is subject to various regulatory and other external approvals.

6. Future outlook
The Company is currently assessing how the Transaction might impact its earnings for the fiscal year ending March 2023 and will make an immediate announcement should any information warranting disclosure be identified.

Advisors

Goldman Sachs Japan Co., Ltd., and Skadden, Arps, Slate, Meagher & Flom LLP acted as financial advisor and legal counsel to the Company on this transaction, respectively

View source version on businesswire.com: https://www.businesswire.com/news/home/20220502005370/en/

Contacts

Kazuka Nohara
Corporate Communications, SQUARE ENIX HOLDINGS
PR-HD@square-enix.com