Tencent Seeks A Larger Interest In The Developer Of “Assassin’s Creed,” Ubisoft 2022
Tencent plans to increase its stake in Ubisoft Entertainment SA as the Chinese gaming giant makes a switch to the global gaming market.
Shanghai / Hong Kong: Four sources with direct knowledge of the matter told Reuters that Tencent Holdings Ltd intends to increase its stake in French video game group Ubisoft Entertainment SA as the Chinese gaming giant enters the global gaming market.
The sources said that the largest gaming and social media company in China, which bought a 5% stake in Ubisoft in 2018, reached out to the Guillemot family, the founders of the French company, and expressed interest in increasing their stake in the company.
Two sources, who spoke on condition of anonymity, said it was unclear how much Tencent wanted to own in Ubisoft, worth $5.3 billion, but that Tencent aims to become the largest single shareholder in the French company by buying an additional stake.
Three sources said Tencent is hoping to buy an additional stake in Ubisoft, maker of the successful “Assassin’s Creed” video game series, from the Guillemot family that owns 15% of the company.
Two sources familiar with the internal discussions said Tencent had offered up to 100 euros ($101.84) per share for the additional stake. He paid 66 euros per share for 5% in 2018.
The sources said the details of the deal have not yet been finalized and are subject to change.
Ubisoft shares closed up 11% on Thursday, after jumping as much as 21% earlier on the back of a Reuters report of its biggest daily rise since 2004.
Shares of Guillemot Corp SA, the holding company in which the Guillemot family holds a majority stake, closed 7.3% higher.
Hong Kong-listed Tencent saw its shares fall 2% in morning trading on Friday, while the Hang Seng tech index was flat.
Two of the sources said Tencent will also seek to acquire shares from Ubisoft’s general shareholders, in a bid to increase its ownership to become the largest single shareholder.
About 80% of the French company’s shares are held by public shareholders, according to its latest annual report.
All sources declined to publish their names because they are not authorized to speak to the media.
Tencent and Ubisoft declined to comment.
Representatives for Gilmo’s family could not immediately be reached for comment.
The planned stake purchase, Tencent’s last major foreign deal since a regulatory crackdown in late 2020, will help offset some of the pressure in the local gaming market. China’s video game market, the largest in the world, has become a fierce competitor.
One person said, “Tencent is very intent on closing the deal because Ubisoft is a critical strategic asset for Tencent.”
At the cap of €100 per share, Tencent would be offering a 127% premium over the average share price of €44 over the past three months which is close to its all-time high of €108 in 2018.
One of the sources said Tencent submitted a terms sheet to the Guillemot family, a non-binding offer that outlines basic investment terms and conditions, at a price “significantly higher” than the company’s current price to avoid potential competition.
Two sources said the strong bid comes as global game companies struggle to acquire high-quality independent game creators in recent years, which are in short supply.
Two people said that senior Tencent executives traveled to France in May to meet with the Guillemot family about the purchase.
The Chinese game regulator has not granted any 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 of this year, the company has not been included in any of the last four payments.
In May, Tencent reported that its domestic gaming revenue fell by 1% in the first quarter, while international gaming revenue was up 4%.
Tencent, which owns stakes in US video game developers Epic Games and Riot Games, said in June that it would launch its flagship “Honor of Kings” mobile game globally by the end of the year.
In 2016, he bought a majority stake in mobile game maker Supercell for nearly $8.6 billion, one of the biggest gaming deals in the world.
It also owns 9% of British video game company Frontier Developments and said last year it would buy another British developer, Sumo, in a $1.3 billion deal.
Ubisoft, whose titles also include “Prince of Persia” and “Rainbow Six,” in May forecasted lower operating profit for 2022-23 after the company announced operating income for the unreported 2021-22.
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