By Kristin Jones
Video game maker THQ Inc. (THQI) said it has filed for Chapter
11 bankruptcy, and said its assets will be acquired by affiliates
of private equity firm Clearlake Capital Group L.P. in a roughly
$60 million deal.
The company said Clearlake--a so-called "stalking horse bidder,"
or the lead bidder in a bankruptcy sale--has agreed to acquire the
company's four studios and its games in development. The sale will
allow the video game company to "shed certain legacy obligations
and emerge with the strong financial backing of a new owner with
substantial experience in software and technology."
Clearlake has offered a total of around $60 million, including a
new $10 million note for the company's creditors. THQ said it hopes
the sale will be completed in about 30 days.
THQ also said that Wells Fargo & Co. (WFC) and Clearlake
have agreed to provide debtor-in-possession financing of around
$37.5 million, subject to bankruptcy court approval.
The company said that its business will remain in operation
through the sale, and added that its studios remain open and its
development teams continue working. The company doesn't plan to cut
staff as part of the bankruptcy filing.
"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 Chief Executive
Brian Farrell.
THQ said last month that it was evaluating strategic financing
alternatives, in the face of a cash crunch. The move came after it
announced delays for its games, and a second-quarter loss equal to
more than half of the cash left in its coffers.
The company has tried to remake itself as a top-tier game maker
for teens and adults after jettisoning its children's game division
earlier this year. The company's "uDraw" gaming device proved to be
a huge misstep, pushing its shares so low that it had to initiate a
reverse stock split in order to avoid being delisted from
Nasdaq.
Shares fell 12% on Wednesday to $1.22 before trading was halted
on the news. The stock has dropped 84% since the start of the
year.
Write to Kristin Jones at kristin.jones@dowjones.com
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