The THQ Bankruptcy - What's Next

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As I mentioned recently, THQ filed for Chapter 11 bankruptcy protection last month and was set to be purchased by the Clearlake Capital Group, a move that would have in theory kept the company and its IP together until it could be turned around and sold to another buyer down the line. That plan of action was denied by US Bankruptcy Court Judge Mary Walrath, however, due in large part to protests from creditors and other interested parties who claimed that the agreement favored Clearlake too heavily and paid little interest to the value of THQs assets. Though there was hope under that agreement that THQ might stay in operation with its assets intact, those hopes have largely been dashed and THQs IP and assets will hit the auction block on January 22.

Several companies have expressed interest in some of THQs assets, including Electronic Arts (NASDAQ: EA), Ubisoft Entertainment and the Warner Brothers Interactive Entertainment subsidiary of Time Warner (NYSE: TWX) It's not clear at this point which assets the various interested parties hope to obtain, though there are several properties that they could be interested in. In addition to established game IPs such as the Company of Heroes, Darksiders and Saints Row franchises, studios such as Relic Entertainment and Volition Inc. could draw the attention of bidders as well.

Searching online, there is a bit of speculation about which assets these companies might want. Electronic Arts could potentially be interested in Relic's Warhammer 40k: Dawn of War series, both because it would add another strong real-time strategy game to their publishing lineup and because of previous games released under EA's Warhammer Fantasy license. Warner Brothers could potentially be interested in several of THQ's franchises, its success with the Mortal Kombat franchise that it purchased during Midway's bankruptcy showing just how lucrative established franchises can be. Ubisoft, while not officially named as a bidder as yet, previously expressed interest in THQ assets if they should become available and could easily be drawn to console-friendly franchises such as Darksiders as well as studios such as Relic or THQ Montreal that would add to their growing presence in Canada.

Of course, some of THQ's assets have a bit of baggage attached. The Dawn of War series, for example, is made possible through the license that THQ holds for video games based on Games Workshop's Warhammer 40k property. The franchise obviously won't be worth much without the 40k license, so if the series is purchased it will likely be as part of a larger deal involving Games Workshop that includes the Warhammer 40k license and related properties such as THQ's Warhammer 40k Space Marine and possibly assets from the abandoned 40k MMO as well. Other franchises such as the Metro series and THQ's WWE games are subject to similar license agreements and would require more wrangling to purchase. There's also the question of THQ's upcoming games such as Company of Heroes 2 and Metro: Last Light; while the games closest to release aren't likely to experience many problems, the fate of games that are relatively early in their development is still up in the air. Add to that questions of post-release support for upcoming games and it's clear to see that there is a lot to be ironed out in the next few months.

While the purchase of established franchises makes more sense for bidders than the purchase of the company as a whole, I must say that I'm kind of sad to see THQ go. Though I've shown little hope for THQ reclaiming its former glory when I've previously written about the company's troubles, I was still rooting for them. I've been a fan of THQ's games for years, gotten to know a few people from THQ and Relic Entertainment online and even had an opportunity to do a Q&A session with the lead developer for Dawn of War II: Chaos Rising before the game was released. Though the company itself had its problems, there were some good people working for it and its studios and I hope that they find their way on to bigger and better things once this is done.

Croaxleigh has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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