EXCLUSIVE Tencent seeks bigger stake in ‘Assassin’s Creed’ maker Ubisoft -sources

HONG KONG, Aug. 4 (Reuters) – Tencent Holdings Ltd (0700.HK) plans to increase its stake in French video game group Ubisoft Entertainment SA (UBIP.PA) as the Chinese gaming giant targets the global gaming market, four sources with direct knowledge of the Reuters case.

China’s largest social networking and gaming company, which bought a 5% stake in Ubisoft in 2018, has contacted the French company’s founding Guillemot family and expressed interest in increasing its stake in the company, the sources said.

It’s not clear how much more Tencent wants to own in Ubisoft, worth $5.3 billion, but Tencent wants to become the largest shareholder in the French company with an additional share purchase, said two sources, speaking on condition of anonymity. .

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Tencent hopes to buy some of the additional stake in Ubisoft, the maker of the blockbuster “Assassin’s Creed” video game franchise, from the Guillemot family, who own 15% of the company, three of the sources said.

Tencent could offer up to 100 euros ($101.84) per share to acquire the additional stake, two sources with knowledge of the internal discussions said. It paid 66 euros per share for the 5% stake in 2018.

Details of the deal are not yet final and are subject to change, the sources said.

Ubisoft shares rose 21% after the Reuters report at 1008 GMT and were poised for their biggest daily gain since 2004.

Shares in Guillemot Corp SA (GTCN.PA), the majority holding company of the Guillemot family, were up 10.3% at 1240 GMT and were poised for their biggest daily jump since January.

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Tencent will also seek to acquire shares of Ubisoft’s public shareholders, two of the sources said, in an effort to increase its ownership and become the largest shareholder.

According to the latest annual report, about 80% of the French company’s shares are held by public shareholders.

All sources were not named as they are not authorized to speak to the media.

Tencent and Ubisoft declined to comment.

Representatives of the Guillemot family were not immediately available for comment.

The planned equity purchase, Tencent’s last major foreign deal since the regulation came into effect in late 2020, will help offset some of the pressure on the domestic gaming market. The Chinese video game market, the largest in the world, has become fiercely competitive.

“Tencent is determined to get the deal done as Ubisoft is such an important strategic asset for Tencent,” said one of the people.

At the high end of $100 per share, Tencent’s offer will be a 127% premium to the average share price of Euro 44 over the past three months, and close to the historic price cap of Euro 108 in 2018.

Tencent has presented to the Guillemot family a term sheet — a non-binding offer that describes the basic terms of an investment — pricing it “far above” the company’s current price to fend off potential competition, one of the sources said.

The aggressive offering comes as global gaming powers rush in recent years to get their hands on quality independent game makers that are in short supply, two of the sources said.

Tencent’s senior executives flew to France in May to meet with the Guillemot family about the purchase, two of the people said.

HOUSEHOLD PRESSURE

China’s gaming regulator has not issued new home gaming licenses to Tencent since June last year, before it froze gaming approvals for nearly nine months. Since it resumed approvals in April this year, none of the past four batches contained the company. read more

In May, Tencent reported that domestic game revenues were down 1% in the first quarter, while international gaming revenues were up 4%.

Tencent, which has stakes in US video game developers Epic Games and Riot Games, said in June that it would release its flagship mobile game “Honor of Kings” worldwide by the end of the year. read more

In 2016, it bought a majority stake in “Clash of Clans” mobile game maker Supercell for approximately $8.6 billion, one of the world’s largest gaming deals ever.

It also owns 9% of UK video gaming company Frontier Developments and said last year it would buy another UK developer Sumo in a $1.3 billion deal. read more

Ubisoft, whose titles also include “Prince of Persia” and “Rainbow Six,” forecast lower operating profits for 2022-23 in May after the company reported 2021-22 operating revenues that had not been estimated. read more

($1 = 0.9819 euros)

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Additional reporting by Pamela Barbaglia in London, Sudip Kar-Gupta and Richard Lough in Paris; Edited by Sumeet Chatterjee, Jason Neely and David Evans

Our Standards: The Thomson Reuters Trust Principles.

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