Atari 2009 Annual Report Download - page 20

ANNUAL FINANCIAL REPORT – REGISTRATION DOCUMENT
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The “Atari Transformation” plan and other cost-saving measures
In June 2008, the Company‟s senior management team announced the “Atari Transformation” plan aimed at
restructuring all global operations. In addition to buying out the minority interests in Atari Inc, the Company has
restructured its worldwide operations. As of March 31, 2009, restructuring costs for continuing operations, mainly within
the scope of Atari Transformation, amounted to €13.9 million. For further information see Note 17 to the 2008-2009
consolidated financial statements.
In the fourth quarter of 2008-2009, Atari put in place another restructuring plan in order to offset the potential continuation
of lackluster demand and to boost its online operations. This reorganization will enable the Company to reduce its
administrative expenses and working capital requirements, through the following:
 The sale of the entire stake in Namco Bandai Partners (see Note 1.5 to the 2008-2009 consolidated financial
statements), which was completed in early July 2009.
 Major cuts in administrative expenses, notably by further reducing staffing levels and restructuring the
Company‟s corporate and publishing operations.
 Streamlining the Group‟s offices throughout the world.
This cost-saving plan is expected to be completed by the third quarter of the 2009-2010 fiscal year.
Sale of distribution operations in Europe and Asia (PAL)
In September 2008, Atari Europe and Namco Bandai Games Europe SAS (Namco Bandai) signed a letter of intent to set
up a strategic distribution partnership. The transaction was completed in February 2009, with Namco Bandai acquiring a
34% interest in Namco Bandai Partners (formerly Distribution Partners), an Atari Europe subsidiary housing Atari‟s
distribution operations for Europe, Asia, Africa, the Middle East and South America. Atari Europe held the remaining 66%
stake in Namco Bandai Partners. The agreement also gives Namco Bandai Partners exclusive retail distribution rights for
video games produced by Namco Bandai in Europe, Australia, New Zealand and Africa as well as by Atari in these same
regions together with Asia and South America. The sale of the 34% stake in Namco Bandai Partners was completed in
February 2009 for approximately €27million on a cash-free, debt-free basis.
In March 2009, Atari Europe announced that in accordance with the terms of the strategic partnership agreement entered
into with Namco Bandai, it intended to exercise its put option to sell its 66% interest in Namco Bandai Partners to Namco
Bandai. For the purpose of exercising the put, the enterprise value of Namco Bandai Partners was set at €60 million on a
cash-free, debt-free basis, as provided for in the partnership agreement.
On completion of the transaction in early July 2009, Atari received a cash payment of approximately €36.3 million, net of
certain existing intra-group loans. In addition, for a period of five years from the completion date, Namco Bandai Partners
will have exclusive retail distribution rights for video games produced by Atari in Europe, Asia (excluding Japan), Africa,
the Middle East, Central and South America, Australia and New Zealand.
As Atari Europe exercised its put option prior to March 31, 2009, income and expenses relating to Namco Bandai
Partners have been recorded in separate lines in the income statement for the years ended March 31, 2009 and
March 31, 2008 under “Profit (loss) from discontinued operations”.
For further information see Notes 1 and 22 to the 2008-2009 consolidated financial statements.
Expansion of the Group’s online publishing operations
In September 2008, Atari announced the creation of a new in-house game development studio placed under the creative
and production leadership of Paulina Bozek, one of the games industry‟s most pioneering and successful producers. The
new studio will focus on innovating and developing mass-market consumer games and services for online-enabled
devices including PCs and games consoles.
Acquisition of Cryptic Studios Inc.
On December 8, 2008, the Company signed a Stock Purchase and Transfer Agreement subject to US law relating to the
acquisition of Cryptic Studios Inc. (“Cryptic”). Cryptic is a California-based publisher of Massively Multiplayer Online
(“MMO") games.
Under the Stock Purchase and Transfer Agreement the existing shareholders of Cryptic transferred all their Cryptic
shares to Atari and cancelled of all stock options related to Cryptic shares.
As consideration, Atari has undertaken to pay a maximum amount estimated at USD 75.1 million (approximately
€59.1 million), based on the Reference Price of Atari share. This amount breaks down as follows:
 A purchase price, payable in cash of USD 27.6 million (approximately €21.7 million), of which USD 26.5 million
payable on completion of the transaction and USD 1.1 million payable on March 1, 2011;
 A potential earn-out payment representing a maximum estimated amount of USD 27.5 million (approximately
€21.6 million), determined based on the achievement of targets for online revenue generated by the Champions
Online and Star Trek Online video games. This earn-out payment will be made in cash and newly-issued Atari
common stock, based on a contractually pre-defined number of shares which will depend on the level of