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EXCLUSIVE Tencent is seeking a bigger stake in ‘Assassin’s Creed’ maker Ubisoft – sources

EXCLUSIVE Tencent is seeking a bigger stake in 'Assassin's Creed' maker Ubisoft - sources
Written by boustamohamed31

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 matter told Reuters.

China’s biggest social networking and games company, which bought a 5 percent stake in Ubisoft in 2018, has contacted the French firm’s founder, the Guillemot family, and expressed interest in increasing its stake in the firm, the sources said.

It is unclear how much more Tencent wants to own in Ubisoft, valued at $5.3 billion, but Tencent aims to become the French company’s largest shareholder with the purchase of an additional stake, two of the sources said on condition of anonymity.

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Tencent is hoping to buy some of the additional stake in Ubisoft, creator of the “Assassin’s Creed” video game franchise, from the Guillemot family, which owns 15 percent of the firm, three of the sources said.

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

The details of the deal have not yet been finalized and are subject to change, the sources said.

Ubisoft shares jumped 21 percent after the Reuters report at 1008 GMT and were set for their biggest daily gain since 2004.

Shares in Guillemot Corp SA (GTCN.PA)the holding company, in which the Guillemot family owns a majority stake, were trading up 10.3 percent by 1240 GMT and were set for their biggest daily jump since January.

Reuters Graphics

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

About 80% of the French firm’s shares are owned by public shareholders, according to the latest annual report.

All the sources declined to be named because they were not authorized to speak to the media.

Tencent and Ubisoft declined to comment.

Representatives for the Guilmot family could not be reached for comment.

The planned stake purchase, Tencent’s last major foreign deal since a regulatory crackdown in late 2020, will help it offset some of the pressure in the domestic gaming market. China’s video game market, the world’s largest, has become fiercely competitive.

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

At the upper end of 100 euros per share, Tencent’s offer would be a 127% premium to the average share price of 44 euros over the past three months and is close to the historic price ceiling of 108 euros in 2018.

Tencent has provided the Guillemot family with a term sheet – a non-binding offer detailing the main terms and conditions of an investment – at a price “well above” the company’s current price to ward off potential competition, one of the sources said.

The aggressive bid comes at a time when global game makers are rushing to snap up quality independent game makers that have been in short supply in recent years, two of the sources said.

Senior Tencent executives flew to France in May to meet with the Guillaumes about the purchase, two of the people said.

INTERNAL PRESSURE

China’s gaming regulator has not granted new game licenses to Tencent at home since June last year, before freezing game approvals for nearly nine months. Since it resumed approvals in April this year, none of the last four batches included the company. Read more

In May, Tencent reported that domestic gaming revenue fell 1% in the first quarter, while international gaming revenue rose 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” globally by the end of the year. Read more

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

It also owns 9 percent of British video game company Frontier Developments and said last year it would buy another British developer Sumo in a $1.3 billion deal. Read more

Ubisoft, whose titles also include Prince of Persia and Rainbow Six, in May forecast a lower operating profit for 2022-23 after the company reported operating income for 2021-22 that missed forecasts . Read more

($1 = 0.9819 euros)

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Additional reporting by Pamela Barbalia in London, Sudeep Kar-Gupta and Richard Lough in Paris; editing by Sumeet Chatterjee, Jason Neely and David Evans

Our standards: Thomson Reuters Trust Principles.

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