Tuesday, January 22, 2013

Atari, Inc. seeks to sever ties with French parent company, files for Ch. 11 bankruptcy protection

Iconic and classic video game company Atari has filed for Chapter 11 bankruptcy. The filing is more about its parent company than itself. The late Sunday filing was designed to allow the company to break away from its debt-laden French parent, Atari S.A.

Atari Inc., as well as three of its affiliates (Atari Interactive Inc., Humongous, Inc. and California US Holdings, Inc.) filed petitions for Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of New York, late Sunday.

Assuming they can break free of Atari S.A., the companies above hope to find a buyer in the next 90 - 120 days, enabling them to take the company private. The resulting company would hope to grow "a modest business focused on digital and mobile platforms," according to a source knowledgeable in the situation, who wished to remain anonymous as he is not authorized to discuss the matter.

Atari Inc.'s CEO is Jim Wilson, who has been with the company since 2008. In 2010, he became CEO of Atari S.A. Wilson has attempted to rebuild the company by developing games for mobile devices and the Web based on classic properties (examples: 1, 2, 3). As of the time of this writing, the once high-flying company has just 40 U.S. employees. Wilson has also licensed the Atari logo for consumer products, a business that provides about 17 percent of the company's revenue.

With these changes, Atari Inc. has become a sort of cash cow for Atari S.A., fueling the parent company's revenue and profit. Overall, Atari S.A. has reported consecutive -- but small -- annual profits in 2011 and 2012, after about a decade of losses.

The ties to Atari S.A. began in the early 2000s, when it began associations with French company Infogrames. That company which changed its name to Atari S.A. in 2003 and in 2008 acquired all Atari's American assets. As Infogrames, Atari S.A. was known for such PC gaming hits as "Unreal Tournament 2003," "Alone in the Dark," and "RollerCoaster Tycoon," among others.

It’s not clear yet who might be interested and buy Atari’s U.S. operations, or if Atari already has a fish on the line. Meanwhile, the French publicly-traded company would have to find its own buyer, or dissolve.



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