Embracer Group is planning to invest €400 million (around $424 million at today’s exchange rate) in cash in its Asmodee Group subsidiary before spinning it off early next year, the company announced.  Asmodee will use $316 million of the new cash to pay down debt and the remaining $108 million to resume acquisitions and to strengthen the balance sheet.

The cash for the investment is part of the proceeds from Embracer’s sale of Easybrain, which is expected to close before the end of the year (see "Embracer Group Improves Balance Sheet").  Embracer had indicated that the sale would allow it to give Asmodee a stronger balance sheet as a send-off, but has now provided the numbers.

After the $424 million investment, Asmodee’s net debt will be $493 million, or about 2.2 times adjusted EBITDA (i.e., the debt will be a little over twice Asmodee’s annual operating profit after excluding extraordinary items).  Asmodee is targeting a debt to EBITDA ratio of 3x in the medium term and 2x in the long term.  Dividends will be paid when debt is less than 2x adjusted EBITDA.

The debt will be rated and sold to institutional investors, replacing the current bridge loan, which will be retired by the Embracer investment and the new debt.

Embracer also revealed that it is targeting mid-single digit annual organic growth for Asmodee, to be enhanced by mergers and acquisitions.