Atari Inc. (the U.S. branch of Atari S.A.) has filed for Chapter 11 bankruptcy, in an attempt to separate itself from its French parent holding company and start over as an independent business.
Citing the need to remove itself from the “structural financial encumbrances” of Atari S.A. and turn its focus on digital games into “a growth engine”, Atari Inc. and its other U.S. businesses (Humongous Inc., Atari Interactive Inc., and California U.S. Holdings Inc.) plan to sell all of their assets in the next 90 to 120 days and completely shift from retail games to digital and licensing.
The sale will include all of the company’s classic brands (Pong, Asteroids, Centipede, Missile Command, Battlezone, Tempest, Test Drive, Backyard Sports, and Humongous) and their iconic logo.
In addition to the complete asset sale, Atari Inc. is also hoping to secure $5.25 million in debtor-in-possession financing from the financial investment company Tenor Capital Management.
While Atari has been little more than a bit player (pun intended) in recent years, the company pioneered the home video game console business with the Atari 2600 in the late 1970’s. Since its founding in 1972 by Nolan Bushnell and Ted Dabney the company has changed hands numerous times, starting with a Bushnell selling the company in 1976 to Warner Communications.
The current iteration of Atari began with its name and assets being purchased from JTS Corp. by Hasbro Interactive in 1998. In 2001 the French company Infogrames Entertainment purchased Hasbro Interactive, and then renamed their U.S. division Atari Inc. in 2003. In 2008 Infogrames Entertainment bought out all of the public shares of Atari Inc., making the company privately owned, and promptly changed their name to Atari S.A. the following year (just to make it a little more confusing). Finally, in 2010 Atari CEO and board member David Gardner resigned from his position and was replaced by Atari’s original co-founder Nolan Bushnell (pictured above).
We will keep an eye out for any new developments with Atari‘s bankruptcy filing and let you know as soon as anything is announced. Check out the full press release below for additional information on today’s filing.
NEW YORK, Jan. 21, 2013 /PRNewswire/ — Today Atari Inc., Atari Interactive Inc., Humongous, Inc. and California US Holdings, Inc. (collectively, the “Companies”) filed petitions for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York. With this move, the U.S.-based Atari operations seek to separate from the structural financial encumbrances of their French parent holding company, Atari S.A. (formerly Infogrames S.A.) and secure independent capital for future growth, primarily in the areas of digital and mobile games.
Within the next 90-120 days, the Companies expect to effectuate a sale of all, or substantially all, of their assets in a “sale free and clear” under section 363 of the Bankruptcy Code or to confirm plans of reorganization that accomplish substantially the same result. These assets include not only one of the most widely recognized brand logos, which is familiar to 90% of Americans, according to a recent survey, but also legendary game titles including Pong®, Asteroids®, Centipede®, Missile Command®, Battlezone® and Tempest®. Other recognized brands include Test Drive®, Backyard Sports® and Humongous®.
Under current management, Atari Inc. has shifted its business from traditional retail games to digital games and licensing with an increased focus on developing mobile games based on some of Atari’s most iconic and enduring franchises. With these moves, the company has added new revenue models, including digital download and advertising. As a result, Atari Inc. has become a growth engine for Atari S.A., which in turn has reported consecutive annual profits in 2011 and 2012.
The company has recently launched a slew of chart-topping titles for iOS and Android mobile platforms, including Atari® Greatest Hits, Outlaw™, Breakout® and Asteroids Gunner®. The company has previously announced upcoming mobile and tablet games based upon the popular Rollercoaster Tycoon® franchise and Atari® Casino.
The Chapter 11 process constitutes the most strategic option for Atari’s U.S. operations, as they look to preserve their inherent value and unlock revenue potential unrealized while under the control of Atari S.A. During this period, the company expects to conduct its normal business operations.
The U.S. companies are also seeking approval to obtain $5.25 million in debtor-in-possession financing from one or more funds managed by Tenor Capital Management, a firm specializing in convertible arbitrage and special situations. Each unit has filed a number of traditional “first-day” pleadings, which are intended to minimize any disruption of their day-to-day operations.
Peter S. Partee, Sr. and Michael P. Richman of Hunton & Williams LLP are proposed to serve as lead counsel for the U.S. companies in their respective Chapter 11 cases.