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THQ files for Bankruptcy, assets acquired by Clearlake Capital [update 1]

THQ has filed for bankruptcy, and its assets have been obtained by Clearlake Capital Group in a 'stalking horse bid.' Reading into the press release below it sounds like Clearlake has snapped up all of the studios assets including its four development houses. This means that the publisher will be able to continue as normal for now with minimal disruption and although the old company has filed for Bankruptcy in order to clear debts, the new company will move forward with development of its currently planned titles pending agreement of the sale.

Just to add a little clarity, stalking horse bids are used to test market interest in an acquisition target and improve sales conditions. Obviously bankruptcy would wipe out THQs debts, leaving the way for any buyer to sell the company and its most valuable assets on, leaving room for a rather large profit for the buyer.

To add a little twist it is also possible that other companies may bid for THQ's assets before the sale is complete, although whether this will happen or not remains to be seen.

[Update 1]

Press release below:

THQ Inc. (THQI), a leading worldwide developer and publisher of interactive entertainment software, today announced that it entered into an Asset Purchase Agreement with a 'stalking horse bidder,' affiliates of Clearlake Capital Group, L.P., to acquire substantially all of the assets of THQ's operating business, including THQ's four owned studios and games in development. The sale will allow THQ to shed certain legacy obligations and emerge with the strong financial backing of a new owner with substantial experience in software and technology.

To facilitate the sale, THQ and its domestic business units have filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Court for the District of Delaware. The company's foreign operations, including Canada, are not included in the filings. The company has obtained commitments from Wells Fargo and Clearlake for debtor-in possession (DIP) financing of approximately $37.5 million, subject to Court approval.

THQ will continue operating its business without interruption during the sale period, subject to Court approval of THQ's first-day motions. All of the company's studios remain open, and all development teams continue. The company remains confident in its existing pipeline of games. THQ maintains relationships with some of the top independent development studios around the globe. As part of the sale, the company is seeking approval to assume the contracts of these studios, and Clearlake will assume these contracts.

"The sale and filing are necessary next steps to complete THQ's transformation and position the company for the future, as we remain confident in our existing pipeline of games, the strength of our studios and THQ's deep bench of talent," said Brian Farrell, Chairman and CEO of THQ. "We are grateful to our outstanding team of employees, partners and suppliers who have worked with us through this transition. We are pleased to have attracted a strong financial partner for our business, and we hope to complete the sale swiftly to make the process as seamless as possible.?

According to Jason Rubin, who joined THQ as President last May, "We have incredible, creative talent here at THQ. We look forward to partnering with experienced investors for a new start as we will continue to use our intellectual property assets to develop high-quality core games, create new franchise titles, and drive demand through both traditional and digital channels."

Clearlake has agreed to serve as the 'stalking horse bidder' for a Section 363 sale process, which allows other interested parties to come forward with competing bids. Aggregate consideration offered by Clearlake for the purchase totals approximately $60 million, including a new $10 million note for the benefit of the company's creditors. The company is asking the Court for a schedule to complete the sale process in about 30 days.

Consumers and retailers should see no changes while the company completes a sale. The new financing will support business operations throughout the period. THQ does not intend to reduce its workforce as a result of the filing, and employees will continue to work their usual schedules and receive normal compensation and benefits, pending customary Court approval.

As is the case after a Chapter 11 filing, THQ expects to receive notice from NASDAQ informing the company that its shares will be delisted from the exchange within nine calendar days of notification.

THQ is being advised by Centerview Partners LLC and FTI Consulting as its financial advisors and Gibson, Dunn & Crutcher as legal counsel. Clearlake is being advised by DLA Piper as legal counsel.

Edited On 19 Dec, 2012

( 4 )
Dead's avatar
Dead 4 years ago
I think we all knew this was coming sooner or later. Let's just hope the assets get picked up be those who will make the best use of them.
Jimbo_1's avatar
Jimbo_1 4 years ago
The only THQ game I have enjoyed recently is Saints Row 3. Even the WWE games took a nose dive IMO.
PrometheusFan's avatar
PrometheusFan 4 years ago
Fingers crossed someone who knows what they're doing gets the rights to Red Faction and Saints Row.
Robichoico's avatar
Robichoico 4 years ago
I hope THQ manage to pull out of things. Unfortunately as good as Darksiders 2 is, nobody bought it. South Park is their only upcoming IP I think I'll buy. They feel like a shadow of themselves at the moment. WWE franchise feels like it's going downhill. And both Homefront and the recent Red Faction were pretty terrible.

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