Ubisoft falls, the agreement with Tencent dampens hopes of a takeover
PARIS (Reuters) – Ubisoft fell on the Paris Stock Exchange on Wednesday morning after announcing a deal to raise its capital of China’s Tencent, which many observers initially saw as an end to speculation about a possible takeover of the video game publisher.
Ubisoft shares tumbled 12.55% to $43.04 as of 10:15 am, the biggest drop from the broad European Stoxx 600 index, which itself was down 0.53%.
The stock thus falls back to the level of mid-May.
The agreement, presented on Tuesday evening, concerns both Tencent’s purchase of 49.9% of the capital of Guillemot Brothers Limited, the family holding company, the group’s largest shareholder, and the possibility for the Chinese group to acquire its direct stake in Ubisoft from 4.5% increase to 9.99%.
Tencent’s €300 million investment in the holding company was completed on the basis of a valuation of €80 per Ubisoft share. A level well above the current price, but which leaves many analysts cold, for whom the agreement above all excludes the possibility of a public takeover bid for the entire capital.
This hypothesis seems “even less likely” today, estimates Cowen & Co, which sees the agreement with Tencent as a positive element for Ubisoft, but not for the share price.
“The prospect of a takeover and a fight for Ubisoft is gone,” notes Charles-Louis Planade, dear mid-cap partners. “For Tencent (…) this amounts to sending all other potential buyers a message saying, ‘This is me'”.
For JPMorgan, “if Tencent can’t sell for five years and can’t increase its stake for eight years, Ubisoft can still be acquired, but it would be difficult without the support of the Guillemot concert”.
(Written by Marc Angrand, with Diana Mandiá and Danilo Masoni)
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