THQ Files for Chapter 11

The beginning…

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.

For additional information about THQ, please visit For information regarding the Chapter 11 case, please visit

About THQ
THQ Inc. is a leading worldwide developer and publisher of interactive entertainment software. The company develops its products for all popular game systems, personal computers, wireless devices and the Internet. Headquartered in Los Angeles County, California, THQ sells product through its network of offices located throughout North America and Europe. More information about THQ and its products may be found at

About Clearlake Capital Group
Clearlake Capital Group, L.P. is a private investment firm focused on special situations and private equity investments such as corporate divestitures, recapitalizations, buyouts, reorganizations, turnarounds and other equity investments. Clearlake seeks to partner with world-class management teams by providing patient, long-term capital and operational expertise to invest in dynamic businesses. Clearlake currently manages approximately $1.4 billion of equity capital, and Clearlake’s founding principals have led over 50 investments totaling more than $2.7 billion of capital in sectors including business services, communication, consumer products/retail, defense/public safety, energy/power, healthcare, industrials, media, and technology. For more information, please visit

THQ Inc. Caution Concerning Forward-Looking Statements
This press release contains statements that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates and projections about the business of THQ Inc. and its subsidiaries (collectively referred to as “THQ”), including, but not limited to, expectations regarding the agreement with Clearlake and the bankruptcy case. These statements are based upon management’s current beliefs and certain assumptions made by management. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including, but not limited to, the adverse impact of the bankruptcy case on THQ’s business, financial condition and results of operations, including its ability to maintain customer and supplier relationships, THQ’s ability to obtain bankruptcy court approval in connection with the bankruptcy case, the actions of THQ’s creditors and other third parties with interests in the bankruptcy case, competitive, economic, legal, political, and technological factors affecting our industry, operations, markets, products, or pricing. Readers should carefully review the risk factors and the information that could materially affect THQ’s financial results, described in other documents that THQ files from time to time with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal period ended March 31, 2012 and subsequent Quarterly Reports on Form 10-Q, and particularly the discussion of trends and risk factors set forth therein. Unless otherwise required by law, THQ disclaims any obligation to update its view on any such risks or uncertainties or to revise or publicly release the results of any revision to these forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.

Nooooooooooooooooooooo SR4 I want you

Yeah, I pray Volition survives whatever happens, and then makes Freespace 3. ;)

Sad and disappointing news. This year has been an absolute bear for the game industry.

Best wishes to any affected by this development.

Stalking Horse Bidder? Is that an industry term?

Can anyone summarize that?

I want to buy Metro Last Light on day one next year. Don’t fuck it up THQ.


The tldr seems to be they will emerge from this with new ownership and that ownership fully intends to see through their current slate of games. That’s kind of the point to such an acquisition, I’d think.

Chapter 11 is not a death sentence. Many businesses have recovered from filing with enough time and proper management. Some have even gone on to prosper.

That said, it’s not a sign of health and it was the beginning of the end for countless companies. Hopefully, THQ can dig their way out of this.

Regarding Clearlake Capital, I hope they don’t decide to liquidate and run.

The Stalking Horse Bidder is a legal term for the favored buyer of the assets of the company who is going through a 363 sale under Chapter 11 Bankruptcy.

Essentially this is a prepackaged bankruptcy where they have already lined up a buyer who is ready and able to complete the purchase of the business assets in the next 30 days. Anyone coming in to buy the company must beat the Stalking Horses Bidders offer, plus pay an additional premium to account for the risk reduced by the Stalking Horse Bidder’s previous due diligence.

Obviously, this is the fault of the humble THQ bundle. Correlation = causation!

Hmm. Nevermind what I posted above. On further digging, I guess this is going to be pretty much the end of THQ. There’s about zero chance that Clearlake is actually going to continue running THQ as a business past releasing the games almost ready to ship like South Park, Metro, and maybe CoH 2. I doubt anyone else is going to buy them later as a whole unit.

That leaves paring down staff, selling off physical assets, and finally selling IPs to various bidders so Clearlake can make the profit they want by taking advantage of the Chapter 11.

Details, if you will. Preferably with links.

Looking at Clearlake’s history and portfolio. No links that I can share. Sorry. (I’m sure others can find this stuff outside of what I can internally.)

Volition is worth moneys.

Relic is worth moneys, too.

Please god, don’t let either EA or Activision buy them from Clearlake.

Can’t see either express any interest in Relic…neither outfit has much respect for PC games.

Unsure either would express interest in Volition, for that matter. Activision tried and failed for many years to cash in on “open-world” Grand Thefts Auto-style games (True Crime, Spiderman, etc.) going so far as to gut and eventually kill off Tony Hawk skateboarding game franchise in the process. Had this happened 6-7 years ago to a time-traveling version of Volition Inc that had already released the first 3 Saints Row games, Activision would’ve jumped at the chance. Now, seems doubtful.

Interesting stuff. Here are the sales predictions in their bankruptcy filing for the upcoming titles:

Here are the development budgets:

As others have summarized, this is basically THQ at a crossroads, and possibly an endgame.

But that doesn’t need to be all bad.

Clearlake is clearly buying low here, and looking to sell high. I think it would be surpassing folly for them to want THQ and NOT want to see some of the high-profile titles nearing completion get released. The strategy has to be to allow in-development projects under THQ’s umbrella to proceed.

At the very worst, they sell off Volition and Volition-related IP to someone as a package. They release COH2, and if it does well they sell off Relic and Relic-related IP after that. (If COH2 sells well, the value of that is sky-high because the buyer gets to do expansions and DLC.)

Does that chart above imply the net cost for Darksiders II was $79 million, or am I misreading it somehow? Because, if so… DAMN…

They would expect Homefront 2 to sell 4 million? Riiiiight…now I see why they are in chapter 11.