‘Lord of the Rings’ and ‘Tomb Raider’ To Be Spun off Under New Company After Embracer Chair Calls Its IP ‘Among The Most Undervalued in the Industry’

“Lord of the Rings” owner Embracer is set to spin the Tolkien IP as well as other legacy properties such as “Tomb Raider” into a separate holding company, Fellowship Entertainment, with chair Lars Wingefors calling its assets “among the most undervalued in the industry.”

Fellowship Entertainment is set to be listed on Nasdaq Stockholm in 2027 to time with the company’s “notably stronger product pipeline” that year.

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That pipeline includes Prime Video’s adaptation of “Tomb Raider,” starring Sophie Turner, which is slated for release in “early” 2027 while the Warner Bros.-produced, Andy Serkis-directed feature “The Lord of the Rings: The Hunt for Gollum” is set to open in theaters that December.

In a letter to shareholders, Wingefors explained that Fellowship Entertainment would be re-positioned as an “IP-led entertainment company” focusing on publishing, licensing and development of brands including “Lord of the Rings,” “The Hobbit,” “Tomb Raider,” “Kingdom Come: Deliverance” and more.

“I think the assets held by Fellowship Entertainment are among the most undervalued in the industry and I feel it’s my duty as the largest shareholder to change this and create a structure to realize their full potential,” Wingefors wrote in his letter.

He explained that part of the strategy behind the spin-off was to clarify market messaging around Fellowship Entertainment’s offering and attract “a larger pool of international investors” to the company.

As part of the restructure Wingefors, who founded Embracer as a video games publisher in 2011, announced the creation of a new IP and licensing business unit under Fellowship Entertainment.

Comics publisher and film producer Dark Horse, which has IP including “The Mask,” “Sin City” and “Hellboy,” will sit under the new licensing unit. The plan is to release at least two triple-A “products” a year and increase focus on external licensing.

Current Embracer Group CEO Phil Rogers, who took over from Wingefors last year, will assume the role of group CEO for Fellowship Entertainment.

Meanwhile Embracer, which will recruit a new CEO, is set to exclusively focus on on mobile games, PC and console games, physical distribution of video games, collectibles and film distribution (under its Plaion Pictures banner), with a focus on profits and shareholder returns. Wingefors admitted that “game development spend is our largest cost item across the group.”

In his letter, Wingefors said the decision to sever Fellowship Entertainment was prompted by the successful spin-off of two other businesses, Asmodee, a tabletop games publisher and distributor, and gaming entity Coffee Stain, which were both listed independently last year.

Embracer has undergone a painful restructuring process post-pandemic after a COVID-era buying spree saw it acquire dozens of entities including Dark Horse in 2021 as well as both “Tomb Raider” owner Crystal Dynamics and “Lord of the Rings” owner Middle-earth Enterprises in 2022 (the latter at a cost of $395 million).

The following year the company was forced to cut 8% of its global workforce, amounting to around 1,400 jobs, and shut down or dispose of a number of games studios, after claiming a $2 billion deal with an international entity had fallen through at the eleventh hour.

“I am painfully aware that the value creation has been negative since the peak pandemic years,” Wingefors said in his letter announcing the creation of Fellowship Entertainment. “With that said, I am confident that today’s announced changes will enable more and faster shareholder value creation than keeping it in the current structure.”

Embracer’s latest results for its fourth quarter exceeded industry expectations by reporting a $38.3 million adjusted operating profit (SEK 360 million). It has also announced a share buyback program of up to $80 million (SEK 750 million), which is set to run until March 2027.