China’s Tencent wants to strengthen its stake in Ubisoft, sources say

China’s Tencent wants to strengthen its stake in Ubisoft, sources say

by Julie Zhu and Selena Li

HONG KONG (Reuters) – Chinese video game and social media giant Tencent Holdings wants to strengthen its stake in Ubisoft to strengthen itself in the global video game market, four sources familiar with the matter told Reuters.

Tencent, which acquired a 5% stake in Ubisoft in 2018, approached the Guillemot family, the founder of the French group, and expressed an interest in raising the company’s capital, the sources said.

Tencent, of which it is not known how much stake it would like to increase, would then become Ubisoft’s main shareholder if successful, two of the sources said.

To strengthen itself, it could pay up to 100 euros per title, two of the sources said, a premium of 127% compared to the average of Ubisoft’s stock price over the last three months and close to its highest price reached in 2018 at 108 euros.

In 2018, Tencent acquired the 5% stake in Ubisoft by paying 66 euros per share.

On the Paris Stock Exchange, Ubisoft shares soared as a result of this information, gaining 12.6663% to 47.41 euros around 10:55 GMT while it was moving around equilibrium until then.

Guillemot Corp, a holding company owned by the Guillemot family, climbed 7.1763% at the same time.

According to three of the sources, Tencent wants to strengthen itself in Ubisoft by buying part of the Guillemot family’s 15% stake.

To increase its stake, Tencent also wants to acquire shares from the other shareholders of the creator of “Assassin’s Creed”, the sources said again.

According to Ubisoft’s annual report, the free float of the French group’s capital amounts to about 80%.

The details of the agreement have yet to be finalized and are subject to change, said the sources, who spoke on condition of anonymity because the information is confidential.

Tencent and Ubisoft declined to comment, while representatives of the Guillemot family could not immediately be reached for comment.

A HIGHLY COMPETITIVE CHINESE MARKET

Tencent has submitted a non-binding offer to the Guillemot family outlining the terms of its investment, one of the sources said, with a price “much higher” than the company’s current stock market price in order to counter any potential competing offer.

This approach by Tencent, whose executives came to France in May to meet the Guillemot family, shows that the video game giants are trying at all costs to get their hands on quality independent companies, the sources explained.

If it manages to strengthen its stake in Ubisoft, the transaction will allow Tencent to strengthen abroad, while competition is tough on the Chinese games market and the sector has also been penalized by the tightening of Chinese regulations in the technology sector, which has resulted in a halt to its international expansion.

“Tencent is very determined to close the deal because Ubisoft is an important strategic asset for Tencent,” a source stressed.

Last May, the Chinese group reported that its sales in China fell by 1% in the first quarter while they increased by 4% abroad.

Since May 2021, the Chinese gaming regulator has not granted any new gaming licenses to Tencent before freezing the granting of new licenses for a period of almost nine months.

Since the resumption of licensing last April, none of the last four lots awarded have concerned Tencent.

Abroad, Tencent holds stakes in the Epic Games and Riot Games studios. In 2016, the group also acquired a majority stake in Supercell, the creator of “Clash of Clans”, for $8.6 billion. He also owns 9% of the British video game group Frontier Developments.

Ubisoft in July lowered its revenue growth forecast due to delays in the launch of new games.

(Reporting by Julie Zhu and Selena Li in Hong Kong, with Pamela Barbaglia in London, Sudip Kar-Gupta and Richard Lough in Paris, French version by Matthieu Protard, editing by Jean-Michel Bélot)

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