THQ’s assets have been split off and sold separately during bankruptcy proceedings.

JAN. 23, 2013 • A month after THQ entered Chapter 11 bankruptcy and restructuring, an asset auction was held and no potential buyer came forward with a bid higher than the sum of individual bids for the publisher’s separate assets. As a result, THQ management has recommended to the bankruptcy court the separate sale of assets, and U.S. Bankruptcy Judge Mary F. Walrath in Wilmington, Delaware promptly approved the sales. The Bloomberg news service reported THQ attorney Jeffrey C. Krause told Walrath at the hearing that the combined bids totaled just under $100 million. Around $29 million in THQ assets, including the Vigil Games studio, were left un-acquired. Highlights of the sale included Sega Sammy Holdings Inc. paying $26.6 million for Relic Entertainment (Warhammer 40,000). The Volition Inc. studio (Saints Row) was acquired for $22.3 million by Koch Media GmbH. Koch also took on a pair of unpublished titles, Metro 2033 and Metro 2034, for $5.9 million. Take-Two Interactive acquired the unpublished Evolve for $10.9 million. Ubisoft paid $2.5 million for THQ Montreal, and $3.3 million more for highly anticipated South Park: The Stick of Truth. The Homefront franchise, which has been one of the bright spots for THQ in recent years, was sold to Crytek GmbH for $544,000. THQ had entered bankruptcy on Dec. 19 with a “stalking horse” suitor in Clearlake Capital Group. If no other bidder topped the latter’s $60 million offer the group could acquire THQ. After 21 days with no higher offer, THQ attempted to hold the asset auction, but creditors balked and the publisher was forced to wait the full month for interested parties to fully evaluate available assets singularly. When the auction was held, Clearlake adjusted its opening offer to $42.9 million. Most of THQ’s headquarters staff, who were not acquired, will now be laid off immediately.

Impact: Enough has been said about what brought THQ to this fate. When a major publisher like THQ goes out of business they own a lot intellectual property that may not make sense to own as a whole but can be more valuable split off into individual properties.  Therefore it is worth analyzing who bought what and whether they got a bargain in the process.

THQ acquired Relic in 2004 for $10 million.  At the time Relic was best known for the Homeworld series, but under THQ they have focused on Warhammer and Company of Heroes real-time strategy (RTS) games mainly for the PC. Sega Sammy’s $26 million acquisition of Relic should prove to be a nice fit with the Total War RTS franchises from Creative Assembly.  Relic’s main upcoming game, Company of Heroes 2, is a sequel to their 2006 hit Company of Heroes and looks to do well with PC gamers. The best parts of the acquisition is Relic’s reputation with fans, its technology and other franchises with good followings, such as Dawn of War and the dormant Homeworld. Basically this is a play for Sega Sammy to target core PC gamers.

Volition sold for $22.3 million.

Volition was acquired by THQ in 2000 for $19 million.  They initially focused on getting THQ into the core gaming market with the first-person shooter (FPS) Redfaction series and the role-playing Summoner series, both for multiple platforms.  However, the main value in German publisher group Koch Media GmbH’s $22.3 million acquisition of Champaign, Illinois developer Volition is in the Saint’s Row franchise, once dubbed a GTA San Andreas knockoff.  Saints Row has a loyal and growing fan base that should easily result in sales of over 3 million units if the game lives up to expectations. Saints Row 4 is currently in development and could potentially release later in 2013 though that is far from certain this early in the year.  The latest version in the Red Faction series was a big disappointment in 2011. 

Koch’s other acquisitions focused around specific game properties in development.  The $5.9 million pickup of the Metro series was somewhat of a good geographic fit given Koch is headquartered in Germany and Metro developer 4AGames, founded by former S.T.A.L.K.E.R. developers, is in the Ukraine.  Despite some loyal fans, first-person shooting game Metro 2033 was not a huge hit upon release in 2010.  However, the franchise does show some potential for growth, given the first game was under marketed and fairly positively reviewed.  In addition it appears that the second game in the franchise should launch in the first half of this year.

Take-Two’s $10.9 million pickup of Turtle Rock Studios’ Evolve speaks highly of this unknown game as the publisher has talked repeatedly about its strategy to bring only high quality, edgy original or internal IP to market.  THQ’s bankruptcy filings projected sales for the title at 4 million units, implying it is an AAA console title, and given the developer’s work on Valve games Left 4 Dead 2 and Counter-Strike: Source, it’s highly likely this game will be an ambitious shooter with robust online features. If Take Two can improve upon the game quality and marketing, it’s possible the game could actually beat THQ’s projections.  If Evolve’s sales evolves the way THQ forecasted it means Take-Two got itself a deal.

Ubisoft may have been the most successful of the bidders with getting all of THQ’s Montreal assets for just $2.5 million, despite the potentially awkward situation this creates with studio head Patrice Desilets who actually left Ubisoft Montreal in 2010 while Assassin’s Creed Brotherhood was still in development. Beyond THQ’s Montreal studio, the biggest value pickup in the entire auction process could be Ubisoft $3.3 million acquisition of South Park: Stick of Truth from developer Obsidian Entertainment in Irvine, Calif. While not all of the developer’s past RPG games have been huge hits, it has had some good traction in sequeling IP it did not originate, such Star Wars: KOTOR 2, Neverwinter Nights 2, Fallout: New Vegas and Dungeon Siege III. Stick of Truth looks to be its biggest game yet. Direct involvement of South Park creators Trey Parker and Matt Stone (all writing and voice acting) appears to have added massive credibility and authenticity to fans of both the TV and RPG gamers in general.

Crytek picked up Homefront 2 for the equivalent of 136,000 Big Macs.

If any acquisition could be a sleeper hit it might be Crytek’s $500k acquisition of Homefront 2, a game the German mega studio had been tasked by THQ to develop anyway.  The game is the sequel to THQ’s 2011 Homefront developed by defunct Kaos Studios of New York City. Homefront had a strong premise of a near future North Korean invasion of the United States in a nod to the film Red Dawn (the original from 1984) whose director consulted on the project.  While the game had serviceable multiplayer, the game was very buggy, had pacing issues and many critics felt ended abruptly when it finally all came together. This was a tough lesson for THQ, as developing a shooter to compete with the likes of Call of Duty or Battlefield in very expensive New York City proved too costly.  Despite its flaws, worldwide sales eventually finished around two million units begging the question of how well the title might have done under better circumstances.  Given Crytek’s pedigree in the shooter genre based upon the Crytek game engine, and the fact that they now own the IP as well, it could prove to be a rather successful project.