Atari SA (EPA:ATA) filed for bankruptcy protection in Manhattan with an objective to separate its unprofitable French parent and seek independent funding.

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Chief executive, Jim Wilson said the move was the “best decision to protect the firm and its shareholders.” The auction process in US bankruptcy proceedings will “maximise the proceeds” going to shareholders, he added.

The US based firm along with affiliates Atari Interactive Inc., Humongous Inc. and California U.S. Holdings Inc., asked to be jointly administered in the filings yesterday in U.S. Bankruptcy Court, according to a statement.

“Within the next 90 to 120 days, the companies expect to effectuate a sale of all, or substantially all, of their assets,” in a free and clear sale under the U.S. bankruptcy laws, or confirm reorganization plans that “accomplish substantially the same result,” according to the statement.

The video game maker, founded in 1972, was a pioneer in arcade and video games, but now lags well behind its competitors like Activision Blizzard, Inc. (NASDAQ:ATVI), the world’s largest by sales, and Electronic Arts Inc. (NASDAQ:EA).

New York-based Atari Inc,  maker of popular games like Pong” and “Asteroids,” owns or manages more than 200 brands, including “Centipede,” “Missile Command” and “Rollercoaster Tycoon.” As per the information on its website, the games can be enjoyed online, on mobile devices and on consoles from Microsoft Corporation (NASDAQ:MSFT), Sony Corporation (NYSE:SNE) (TYO:6758) and Nintendo Co., Ltd (PINK:NTDOY) (TYO:7974).

The decision to detach the U.S. business follows a statement from the parent company Atari, saying it was strained for cash. The French parent hasn’t been profitable since 1999, despite all efforts, including asset sales and restructuring. For 2012-2013, the parent company expects a “significant loss”.

As per the Chapter 11 filing, Atari SA (EPA:ATA) owes between $10-$50 million to at least 200 creditors, which could go up to 999. It has assets amounting to $1 million to $10 million.

“The Chapter 11 process constitutes the most strategic option for Atari’s U.S. operations, as they look to preserve their inherent value and unlock revenue potential unrealized while under the control of Atari SA (EPA:ATA),” according to yesterday’s statement. “During this period, the company expects to conduct its normal business operations.”

Atari’s stock lost 5.6 percent to 84 centimes in Paris trading before closing yesterday at 86 centimes, down nearly 3.4 percent. The game maker has lost almost half of its market value since last year, its current market value is about 25.4 million euros ($33.8 million).