Embrace, the unsung giant who got his hands on Lord of the Rings

Embrace, the unsung giant who got his hands on Lord of the Rings

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The Swedish company Embracer, which already owns a myriad of video game studios, has acquired Middle-earth Enterprises, the company that owns the rights to the works of JRR Tolkien. But not only…

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The excitement is in full swing around the series taken from the trilogy The Lord of the Rings, which will be released on September 2 on Amazon’s Prime Video platform. But in the shadow of the American giant, another actor is rubbing his hands. This is the Swedish band Embracer.

And for good reason, the Scandinavian company, which owns a myriad of a hundred video game studios, got its hands on Middle-earth Enterprises, the company that owns the rights to the works of JRR Tolkien. This means that Embracer now controls films, video games, board games, merchandising, stage productions or theme park rights inspired by the Lord of the Rings and Hobbit. In addition to the Amazon series, for which the American giant has committed $1 billion over five seasons, Embracer has already expressed its desire to explore “additional films based on iconic characters such as Gandalf, Aragorn, Gollum, Galadriel, Eowyn and other characters from JRR Tolkien’s literary works”.

Embracer has acquired the North American subsidiaries of Square Enix

However, the Lord of the Rings is far from the only recent release from the voracious Swedish group. The latter also acquired several video game players, namely Limited Run Games, Singtrix, Tuxedo Labs and Tripwire Interactive. All of these acquisitions represent an investment of approximately $577 million. Embracer has even reached an agreement to buy another company in the field of PC and console games, but this acquisition is for the moment kept secret by the Swedish company.

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Particularly active in terms of acquisitions, Embracer has also redeemed, earlier this year, the North American subsidiaries of the Japanese publisher Square Enix (Crystal Dynamics, Eidos Montreal and Square Enix Montreal) for 300 million dollars. An operation that will allow the Swedish group to get their hands on a catalog of around fifty prestigious games and licenses, including tomb Raider, Two Ex and Thief. Enough to expand an already well-stocked portfolio, which includes studios like Gearbox (Borderlands), Volition (Saints Row) or even 3D Realms (bombshell). Last year, Embracer also got its hands on Asmodee, the main publisher of board games in France, for 3 billion euros.

Saudi cash to fund its acquisition strategy

If the Swedish group has been renowned lately for being an insatiable buyer, it also distinguished itself in June in the position of seller. Indeed, the Nordic company has announced that it has reached an agreement with the investment fund Savvy Gaming Group, a 100% subsidiary of the sovereign wealth fund of Saudi Arabia, to sell 8% of its shares to the latter. The transaction amounts to 981 million euros. The Saudi fund remains a minority in the company, from which it recovers 5.4% of the votes on the board of directors. As a reminder, Savvy Gaming Group already had significant stakes in companies such as Electronic Arts, Take-Two Interactive, Capcom, Koei-Tecmo, Square Enix, and even recently Nintendo.

Cash from Saudi Arabia will not be too much for Embracer in the current context. The group’s explosive growth policy is obviously accompanied by extremely high expenses, which explain the major operating losses recorded in the 2021/2022 fiscal year: 353.8 million euros, or 22% of its turnover. But it’s the price to pay to make a difference in a video game market that is currently consolidating strongly, as evidenced by the acquisition of Zynga for 12.7 billion dollars by Take-Two or the takeover from Activision Blizzard by Microsoft for $68.7 billion.

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