Swedish gaming giant Embracer's failed mega deal revealed
The $2 billion was ultimately with the Saudi Arabia Public Investment Fund.
It was only a couple of short months ago that we were able to report that the Swedish gaming giant Embracer Group, headed by investor magnate Lars Wingefors, had unfortunately lost a seemingly clear super deal with an unnamed partner, leading many to speculate that it might be Sony or Microsoft. We now know that this was not the case. The deal, which was worth $2 billion, that collapsed was apparently with Savvy Games Group, which is backed financially by the Saudi Arabia Public Investment Fund (PIF), which in turn is led by the highly criticised Mohammed bin Salman. This has now led Embracer to start shutting down game studios and they've been laying off staff, which we here at Gamereactor have reported on.
Embracer received $1 billion from the Saudi Arabia Public Investment Fund in 2022 and hopes to build a new deal with the Arabs, who have said on several occasions that they intend to build Saudi into one of the world's most important gaming hubs. PIF's CEO Brian Ward is a real industry veteran who has worked for EA and Activision, among others, and we hope to learn more details about this failed deal in the future.
Axios writes the following: Why it matters: The fallout of the failed deal sent shares of The Embracer Group — Savvy's would-be partner, and one of the most voracious acquirers of video games studios in the last several years — plummeting, and forced it into cost-cutting mode.
More broadly, the revelation may raise questions about how Saudi Arabia will proceed with its controversial ambitions to invest $38 billion in the video game industry.
Driving the news: Axios learned of Savvy's involvement from four sources familiar with the deal who were not authorized to speak about it publicly, and after reviewing documentation related to the planned partnership.
An Embracer spokesperson declined to comment for this story. A Savvy rep did not reply by press time.
Catch up quick: The $2 billion deal would have involved Savvy investing in the development and publishing of games from Embracer, helping establish the Saudi company as a major gaming label.
Embracer had been promising investors news of a lucrative "transformative partnership ... with several industry partners" since November 2022. But in a May 24, 2023 note, Embracer management announced the collapse of one of those massive partnerships, while carefully avoiding naming the partner.
In the May note, Embracer said that the parties had reached a verbal commitment in October 2022 that would have resulted in more than $2 billion "in contracted development revenue over a period of six years."
"All documentation was finalized and ready to go as of yesterday," the company said. "We asked for the execution of the agreement before our Q4 announcement. However late last night we received a negative outcome from the counterparty."