Tencent seeks bigger stake in 'Assassin's Creed' maker Ubisoft -sources
04/08/2022 13:35
(Updates stock reaction, adds chart)
By Julie Zhu and Selena Li
HONG KONG, Aug 4 (Reuters) - Tencent Holdings Ltd 0700.HK
plans to raise its stake in French video game group Ubisoft
Entertainment SA UBIP.PA as the Chinese gaming giant pivots to
the global gaming market, four sources with direct knowledge of
the matter told Reuters.
China's largest social network and gaming firm, which bought
a 5% stake in Ubisoft in 2018, has reached out to the French
firm's founding Guillemot family and expressed interest in
increasing its stake in the firm, the sources said.
It is not clear how much more Tencent wants to own in
Ubisoft, valued at $5.3 billion, but Tencent aims to become the
single largest shareholder of the French company with an
additional stake purchase, two of the sources said, speaking on
condition of anonymity.
Tencent is hoping to buy a part of the additional stake in
Ubisoft, the maker of the blockbuster "Assassin's Creed" video
game franchise, from the Guillemot family, which owns 15% 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 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 finalised and are subject to
change, the sources said.
Ubisoft shares surged 16% after the Reuters report in their
biggest daily rise since 2010.
Shares in Guillemot Corp SA GTCN.PA , the holding company
in which the Guillemot family owns the majority shareholding,
were trading up more than 7%.
Tencent will also seek to acquire shares from public
shareholders of Ubisoft, two of the sources said, in a bid to
boost its ownership and become the single-largest shareholder.
About 80% of the French firm's shares are owned by public
shareholders, according to its latest annual report.
All the sources declined to be named as they are not
authorised to speak to the media.
Tencent and Ubisoft declined to comment.
Representatives of the Guillemot family could not be
immediately reached for comment.
The planned stake purchase, Tencent's latest major foreign
deal since a regulatory crackdown in late 2020, will help it
offset some of the pressures in the domestic gaming market.
China's video games market, the world's largest, has become
fiercely competitive.
"Tencent is very determined to nail down the deal as Ubisoft
is such an important strategic asset for Tencent," one of the
people said.
At the top end of 100 euros per share, Tencent's offer will
be a premium of 127% to the stock's 44 euros average price over
the past three months, and is close to its historical price
ceiling at 108 euros in 2018.
Tencent has submitted to the Guillemot family a term sheet -
a non-binding offer describing the basic terms and conditions of
an investment - with a price "way above" the company's current
price to ward off potential competition, one of the sources
said.
The aggressive offer comes as global gaming power houses
have been rushing to snap up quality independent game makers in
recent years, which are in scarcity, two of the sources said.
Tencent's senior executives flew to France in May to meet
the Guillemot family about the purchase, two of the people said.
DOMESTIC PRESSURES
China's gaming regulator has not granted any new game
licences to Tencent at home 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
included the company. urn:newsml:reuters.com:*:nL2N2W90T4 urn:newsml:reuters.com:*:nL1N2XU0UZ urn:newsml:reuters.com:*:nL4N2ZD2VF
In May, Tencent reported that its domestic game revenue
dropped 1% in the first quarter while international game revenue
rose 4%.
Tencent, which has stakes in U.S. video game developers Epic
Games and Riot Games, said in June it would release its flagship
mobile game "Honor of Kings" globally by the end of the year.
urn:newsml:reuters.com:*:nL4N2XV0TT
In 2016, it bought a majority stake in "Clash of Clans"
mobile game maker Supercell for roughly $8.6 billion, one of the
world's biggest ever gaming deals.
It also owns 9% of UK video gaming firm Frontier
Developments and said last year it would buy another British
developer Sumo in a $1.3 billion deal. urn:newsml:reuters.com:*:nL4N2OV188
Ubisoft, whose titles also include "Prince of Persia" and
"Rainbow Six", in May forecast lower operating profit for
2022-23 after the company reported operating income for 2021-22
that missed estimates. urn:newsml:reuters.com:*:nL2N2X31VQ
($1 = 0.9819 euros)
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Ubisoft share price reaction on Tencent plans to hike its stake
https://tmsnrt.rs/3d5iEWx
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(Additional reporting by Pamela Barbaglia in London, Sudip
Kar-Gupta and Richard Lough in Paris, graphics by Julien
Ponthus; editing by Sumeet Chatterjee and Jason Neely)
((julie.zhu1@thomsonreuters.com; +852 2843 6519; Reuters
Messaging: julie.zhu1.thomsonreuters.com@reuters.net))