Embracer bought Borderlands maker Gearbox Entertainment for $1.3 billion back in early 2021 amid an unprecedented acquisition spree that’s since turned into a financial disaster. Now, just three years later, Kotaku has learned that Gearbox is closer than ever to being sold out from under what is arguably the most hated company in gaming.

Gearbox CEO and co-founder Randy Pitchford held a town hall with staff earlier this week in which he told employees that a decision had been made regarding the studio’s future, with more information to be shared next month, according to two sources familiar with the meeting. For months now Pitchford has told developers at Gearbox that there were three possible scenarios: stay with Embracer, sell to someone else, or finance a buyout and go back to being independently run. Kotaku understands that the decision was made to sell, and a deal is in the late stages of being finalized.

Embracer did not immediately respond to a request for comment. Pitchford sent Kotaku the following statement:

I’m delighted that what we might be up to is interesting enough to people that you want to make a story about us for your readers. I’m honored and humbled that our company is a topic of rumor, speculation, and discussion. As always, we will be thrilled to share whenever we have projects to announce or news to share as we work hard towards our mission to entertain the world.

Rumors of a sale first began swirling last September after Reuters reported that Embracer was weighing whether to sell the crown jewel in its crumbling studio empire following the loss of a reported $2 billion in financing. That money was supposed to come from a Saudi-backed game investment fund, according to a report by Axios. Without the extra capital, Embracer imposed a brutal cost-cutting regime on many of its recently acquired studios which resulted in layoffs as well as entire closures.

“There are many options under consideration, including Gearbox’s transfer, taking Gearbox independent, and others,” Gearbox chief communications officer Dan Hewitt told staff in an email obtained by Bloomberg in September after the Reuters story first broke. “Ultimately, we’ll move ahead with whichever path is best for both Gearbox and Embracer.”

The email highlighted a sense of uncertainty that’s cast a shadow over the 25-year-old Texas-based studio since Embracer first revealed its plans for draconian cuts across its global network of subsidiaries in May 2023, sources say. Pitchford promised internally that those cuts wouldn’t result in substantial layoffs at Gearbox at the time, but dozens of people were ultimately let go across recruiting, HR, and other operations roles throughout the year, according to five current and former employees. Those who weren’t impacted by targeted layoffs still had to grapple with freezes on pay raises and hiring.

“I’ve personally been looking for roles elsewhere not just due to the Embracer layoff fears, but due to pay,” said one current developer who wished to remain anonymous because they were not authorized to speak to the press. “Vague and in a holding pattern is definitely par for the course at the moment and has been for most of 2023.”

Gearbox rapidly expanded in an unwieldy way following the Embracer acquisition, becoming a home for additional studios and publishing operations. Embracer acquired Perfect World Entertainment in 2021 and reformed it as part of Gearbox Publishing. Gearbox acquired co-developer Lost Boys Interactive in 2022. And later that same year, Embracer announced that Volition, the 30-year-old studio behind the Saints Row reboot, would be folded under the Gearbox umbrella as well. These same parts of the business have also been ravaged by cuts, including members of the publishing team that helped launch Remnant II, staff at Cryptic which makes the online RPG Neverwinter, and Volition, which was unceremoniously closed by Embracer in the middle of last year.

2023 also saw a creative shakeup within Gearbox. Following the Embracer budget shortfalls, the studio shelved work on some exciting new projects and IPs to focus primarily on the next Borderlands games which are published by 2K, according to two sources familiar with the changes. A follow-up to Borderlands 3 underwent a reshuffling of some of its leadership team as Gearbox tries to get it across the finish line, while a sequel to Tiny Tina’s Wonderlands underwent a soft reboot. Sources tell Kotaku that both projects are still very promising and progressing well, but that the upheaval contributed to feelings of uncertainty on the studio floor. “We’ve lost senior people because of this,” claimed another developer.

So far, 2024 has been a historically bad year for cuts and layoffs across the video game industry, with even the biggest players like Microsoft, Sony, and Electronic Arts, whether due to necessity or cynical opportunism, canceling projects and laying off hundreds of developers. A few developers Kotaku spoke with say this mood hasn’t been helped by the studio’s leadership. Despite monthly meetings with Pitchford, they say there hasn’t been any real clarity on when hiring, pay increases, and promotions might return to normal, or what a future Gearbox might look like under a new ownership regime. “If I were in their shoes my number one priority would be making everyone feel safe,” said one current developer.

But even in the current hellscape, Embracer is viewed as one of the more pernicious parasites. It grew fat on low-interest financing and a post-pandemic market frenzy that allowed it to snatch up big-name studios and IPs, only to leave them all without a safety net when the big risky bets didn’t magically metastasize into a business plan. Embracer CEO Lars Wingefors recently called the current layoffs across his company and beyond merely “something that everyone needs to get through.”

Developers at Gearbox are hoping they can “get through” it without the Swedish holding company hanging like an albatross around its neck. “The thing a lot of us are hoping for is being bought from Embracer and allowed to keep doing what we’re doing or getting back to where we were before project-wise due to more and better funding,” one current developer said. Gearbox won’t be the only major acquisition Embracer unloads. Bloomberg reported that Saber Interactive, currently in charge of a remake of Star Wars: Knights of the Old Republic, will be sold for $500 million.

Clarification 2/29/2024 12:50 a.m. ET: Perfect World Entertainment was folded into Gearbox Publishing.