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BREAKDOWN ON WHY SQUARE ENIX SOLD TOMB RAIDER

Senior Analyst at MST Financial David Gibson provides a breakdown of an internal Square Enix conference call regarding their financial results and the reasoning behind the sale of Eidos and Crystal Dynamics to Embracer Group. The transaction is due to complete by September.

According to David Gibson: "Crystal Dynamics and Eidos sale was driven by concerns that the titles cannibalized sales of the rest of the group and so it could improve capital efficiency, the sale of Crystal Dynamics and Eidos is phase 1, phase 2 is diversification of studio capital structure." When the sale completes, Square Enix will "have US$1.4bn in cash and zero debt... which is plenty to fund expanded game investment and not sell down stakes in its studios."

Embracer Group has agreed to acquire Eidos, Crystal Dynamics and Square Enix Montreal and a catalogue of IPs including Tomb Raider, Deus Ex, Thief, Legacy of Kain and more than 50 back-catalogue games from Square Enix Holdings Ltd. The transaction is subject to various regulatory and other external approvals and is expected to close during the second quarter of Embracer's financial year 22/23 (July-September 2022).

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