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December 20th, 2012, 03:53
Originally Posted by Couchpotato View Post
Clearlake Capital Group is a middleman to sell off company's piece by piece.
"Stocking Horse Bidder" and Assuming Contracts

As best as I can tell, they don't appear to be situating themselves as a chop shop to break down the US operations and sell them for parts. At least the business-news articles seem to suggest they've agreed to terms under which that would be a less-than-optimal outcome for them compared to either owning-operating the company whole or being outbid.


Here they're acting as what is called a "stalking horse bidder" - a term for a company that places an agreed upon initial bid for the company to serve as the minimum (its a real bid and they do buy the company if nobody bids higher.) In this case specifically they placed a bid on the entirety of their US assets (non-US operations are not part of this filing) for approximately $60 million and have offered an additional $10 million note to secure aggreement for the conditions of the sale from the creditors. One of these conditions is that they - Clearlake - assume existing contracts with third party developers.

They are paying the $10 million to the creditors and assuming the contracts regardless of how bidding proceeds, but would only be buying the assets if they are not outbid in the next 30 days. The deal for continuing normal operations means that THQ will retain any value a potential bidder might see in its talent pool since they won't be hemorrhaging staff or accruing back-wages-owed for failing to pay them like some studios that have made the news this year.

What These Terms Might Suggest

This suggests a few things about the intentions of Clearlake as well as the presumed intentions of potential bidders (including Clearlake if nobody else takes it.) First it says that Clearlake sees some particularly valuable properties in those publishing contracts since they're assuming all the existing obligations/liabilities of them and will only turn a profit on them if they can rather quickly find publishers willing to pay a cut for the publishing rights and assume those responsibilities and even then probably only if they release successfully.

Second it says that Clearlake believes that the US assets are at least worth enough for them to risk spending $60 million AND assume WARN obligations to carry those employees for at least 60 days - THQ could have claimed the faltering business exemption and potentially let employees go up to this very point but neither Clearlake nor anyone who outbids can. This suggests they believe that either it is worth getting the company intact and operating a that price to own as an investment, or that they'll make enough money on one or more of the publishing deals that they don't have to maximize profits by avoiding carrying all that staff while lengthening the turn-around time on selling it for parts, or that someone else will want the company intact and this will help ensure they don't actually get stuck with it.

Finally it also says that Clearlake is more eager to act as a sort of reverse agent for the publishing deals (taking a cut from the publisher side) than it is in THQ itself. If this wasn't the case they wouldn't have crafted a deal where they get those contracts no matter what while only committing a lowest possible bid for the rest. In any of the likely scenarios they are expecting that if they do pay $60 million for it plus the $10 million note plus 60 days continued salaries that at the very least they won't lose so much on THQ's US operations and assets to offset what they expect to make on the assumed contracts.
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