Ubisoft shares tumble as Tencent deal seen dampening buyout prospects
Shares of Ubisoft Entertainment (UBIP.PA) fell on Wednesday after the firm disclosed an agreement in which Tencent Holdings (0700.HK) of China will increase its investment in the company. Analysts say this deal lessens the likelihood that the French video game developer would be fully sold.
In the agreement with Tencent Holdings, the developer of the “Assassin’s Creed” and “Tom Clancy’s” video game brands is valued at $10 billion, or about 80 euros per share, which is significantly higher than the stock’s closing price on Tuesday of 43.5 euros.
Tencent becomes the sole largest shareholder in Ubisoft, holding an 11% interest overall with the option of increasing it to 17%.
The transaction, which comes soon after NetEase’s acquisition of unlisted French video game developer Quantic Dream, reflects a wave of industry consolidation in which tech giants are acquiring independent players.
It also brings to an end a trying four-year period for Ubisoft, which was characterized by a string of delays for new video games and claims of sexual harassment that forced a shakeup in top management.
Ubisoft has long been seen as a takeover target, although the founding Guillemot family managed to beat off a raid by media group Vivendi in 2015.
Traders and analysts said the Tencent deal was positive for the French company but removed the speculative appeal of Ubisoft shares.
“The prospects of a takeover and a fight for Ubisoft are gone as Tencent is now really (there),” said MidCap’s analyst Charles-Louis Planade.
A London trader said Ubisoft shares were down on “disappointment that it may not be a takeover target as Tencent has increased (its) stake.”
The transaction makes Tencent part of a shareholder pact with the Guillemot family. The deal involves Tencent’s acquisition of 49.9% of Guillemot Brothers Limited – the holding company that owns the bulk of family’s 15% stake in Ubisoft – with just 5% voting rights.
Tencent’s investment in Guillemot Brothers amounts to 300 million euros, Ubisoft said in a statement on Tuesday evening.
Tencent will not be able to sell its shares for five years, beyond which the Guillemot family will have a pre-emptive right to buy the shares. Ubisoft also said Tencent pledged not to increase its direct stake in the French games maker beyond 9.99% for a period of eight years.