"This company was valued at $2.6 billion two years ago," Paul Morrison protested.
While Morrison looked similar enough to many of the other men in the court room — that's to say, a middle-aged white man in a suit — he was the only person to take the podium and argue for a stop to the proceedings. As an "equity holder" in the company, Morrison and a colleague were frustrated that the entirety of THQ could be valued for as little as $100 million when the last game from just one of its studios sold over five million units. "That would be the [sale] that we'd object to," Morrison said, referring specifically to Saints Row: The Third developer Volition, Inc.
Barring that brief diversion — a reminder that the actual shareholders of companies filing for bankruptcy protection in the historically corporate-friendly Delaware are often on the losing end of things — the majority of the people in Judge Mary F. Walrath's courtroom today were there representing the many companies involved in the messy business of a video game publisher going bankrupt. Included in that grouping are THQ CEO Brian Farrell and THQ President Jason Rubin who, if you didn't know who they were, seemed inconspicuous throughout the proceedings.
After a reported 22 hours of bidding, leading to a six-hour delay in today's proceedings, the tone of the room was one of relief. Perhaps even cheer. Out of eight groupings of assets, seven had bidders. Many of them had backup bids. This was, by all accounts, a successful auction process, despite concerns of shareholders like Morrison.
What sold ... and what didn't
After allowing the delay earlier this morning, Judge Walrath began hearing from the litany of lawyers at 3:30 p.m. in her fifth-floor courtroom, housed in a nondescript office building in downtown Wilmington. THQ lawyer Jeffrey C. Krauss presented the seven asset groupings that were at auction. "Those pieces do not include some of the assets," he said. This process leaves THQ with its physical inventory, accounts receivable, its entire back catalog of games and brands, and its cash on hand. That, together, is estimated to be approximately $29 million.
The seven groupings were Relic Entertainment, with Sega as the lead bidder with $26.6 million; THQ Montreal, with Ubisoft as the lead bidder with $2.5 million; Turtle Rock's Evolve, with Take-Two as the lead bidder with $10.8 million; Saint's Row-developer Volition, with Koch Media as the lead bidder with $22.3 million; the Homefront franchise, with Homefront 2-developer Crytek as the lead bidder with $544K; the Metro franchise, with Koch Media again as lead bidder with $5.8 million; and lastly Obsidian's South Park and the Stick of Truth, with Ubisoft again the lead bidder with $3.265 million. The total value is approximately $70 million.
"Whether current development at Vigil will go forward, I don't know"
The eighth asset grouping was Austin-based Vigil Games, whose Darksiders games found critical success but failed to be significant sellers. "Whether current development at Vigil will go forward, I don't know," Krauss told another reporter after court adjourned. "There was nobody who bid on that development studio." He estimated the Darksiders games and franchise, part of THQ's back catalog mentioned above, would be worth "several million."
This evening, Vigil Games' combat designer Ben Cureton wrote a poignant goodbye to the studio. "We've all been on edge for the past couple months ... and more so, the last couple weeks," Cureton wrote. "I mean, I'm sure you can imagine what it's like to wonder if you will have a job tomorrow. Most of us here joked about it just to keep the mood light, but we all knew what could happen."
Objections and market value
Earlier this morning, a representative for the firm of Young Conaway Stargatt & Taylor, representing THQ in its bankruptcy proceedings, said that a "majority of objections have been resolved" but the parties would need more time to reach a conclusion. This afternoon, after sharing the auction prices, which had to be run over from the law firm office, we learned about those objections.
Lawyers for companies like 505 Games, South Park Digital Studios, Viacom, Crytek, Games Workshop, Yuke's, and others — all companies that had business relationships with THQ — were either present in person or on a conference call to acknowledge the resolution of their objections. Many will carry over to new relationships; for example, Games Workshop will "work in good faith" with Sega — the new owner of Relic, the studio that created titles based on its intellectual property — in order to satisfy its objections to the sale.
"Under the circumstances, the auction was a success."
The piecemeal auction process was the result of creditors seeking more money following THQ's bankruptcy filing; initially, the company entered into an agreement with "stalking horse bidder" Clearlake Capital, called an "unjustifiably accelerated sale timeline" by creditors. Referring to the piecemeal process, Judge Walruth said, "I wasn't sure it was going to work, but I'm glad it did." A lawyer representing the creditors said, "We were certain allowing piecemeal bids would maximize value," adding, "Under the circumstances, the auction was a success."
Following the judge's dismissal of Morrison's complaints, and Krauss' similar dismissal — "We've received nothing from Mr. Morrison," he said — Brian Farrell and President Jason Rubin left the front row with a handful of their colleagues and exited the room. While the day's events weren't quite over, and though Judge Walruth needed some additional details clarified prompting jokes about another sleepless night, the court's approval is little more than a formality.
"I am convinced the marketing process as modified [...] has proven the value of those assets," Walruth said. "I am convinced that the market has spoken. The bids submitted are the highest and best."
For more on the unfolding THQ narrative, be sure to check out our Storystream below.