THQ Inc. (NASDAQ: THQI) is being acquired, maybe. Before you get too excited about any major turnaround huge-premium buyout you better pay attention to the fine print here. Clearlake Capital Group, L.P. has entered into a stalking horse bidder agreement to acquire THQ’s assets in an Asset Purchase Agreement. Here is the problem: the buyout is via Section 363 under Chapter 11, which means it is under bankruptcy protection.

THQ has said that it has obtained a commitment for interim financing to fund its operations without interruption. The agreement covers substantially all of the assets of THQ’s operating business, and it includes THQ’s four owned studios and games in development.

As part of the sale agreement, THQ will get to shed certain legacy obligations and emerge with a new stronger owner with what was called “substantial experience in software and technology.” THQ says that it will continue normal operations without interruption during the sale period, assuming that court approval of THQ’s first-day motions.

To facilitate the sale, THQ and its domestic business units have filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Court for the District of Delaware. THQ’s foreign operations (including Canada) are not included in the filings. Wells Fargo and Clearlake have lined up debtor-in possession financing of approximately $37.5 million.

THQ also said that it expects to receive notice from NASDAQ that its common shares will be delisted from the exchange within nine calendar days of notification. THQ shares were halted down 11.6% at $1.11 on the day and the 52-week trading range is $1.00 to $8.60.

This is one of those buyout scenarios that may not end up being the greatest outcome for the common stock owners.

JON C. OGG

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