Shares of French video game giant Ubisoft experienced a dramatic surge of over 30% on Friday, driven by reports that Tencent and the company’s founding Guillemot family are contemplating a potential buyout.
This news comes amid a significant drop in Ubisoft’s market value, which has plummeted more than half this year, prompting both minority shareholders to explore options for stabilizing the company and boosting its worth.
According to a Bloomberg News report, Tencent and the Guillemot family have been in discussions with advisors to evaluate ways to strengthen Ubisoft’s financial standing.
Among the strategies being considered is a collaboration to take the company private.
As of 3:20 p.m. London time, Ubisoft shares were trading approximately 30% higher.
A turbulent year for Ubisoft
Ubisoft has faced a turbulent year, with its stock value declining 54% in Paris trading, resulting in a market capitalization of about €1.4 billion ($1.5 billion).
As of April, Tencent owned 9.2% of Ubisoft’s net voting rights, while the Guillemot family held approximately 20.5%, as stated in the firm’s latest annual report.
This year’s stock plunge has prompted some minority shareholders, including AJ Investments, to advocate for either a take-private initiative or a sale to a strategic investor.
Despite the potential buyout discussions, sources indicate that these considerations are still in the early stages, with no guarantees that they will culminate in a transaction.
The Guillemot family and Tencent are also exploring other alternatives, as reported by insiders who requested anonymity due to the sensitivity of the discussions, the Bloomberg News report said.
Representatives from Ubisoft and the Guillemot family declined to comment, while a Tencent spokesperson was unavailable for immediate response due to a holiday week in China.
Ubisoft’s stock recently hit its lowest point in over a decade following a reduction in its sales outlook and a delay in the highly anticipated title Assassin’s Creed Shadows.
Ubisoft: production delays and canceled game releases
The company has been grappling with the aftereffects of pandemic-induced production delays and canceled game releases, further straining its operations.
In 2022, several private equity firms, including Blackstone Inc. and KKR & Co., expressed interest in bidding for Ubisoft, amid a wave of large acquisitions in the gaming sector.
Later that year, Tencent acquired a 49.9% stake in the Guillemot Brothers holding company, strengthening its ties to Ubisoft.
This strategic move was viewed by analysts as a method to deter potential suitors while allowing the Guillemot family to maintain control over Ubisoft’s governance.
Under the terms of the deal, Tencent’s stake in Ubisoft is limited to under 10%, preventing it from exercising operational veto rights.
Additionally, Tencent is restricted from selling its shares for five years, after which the Guillemot family retains the right of first refusal.
Yves Guillemot, Chairman and CEO of Ubisoft, emphasized that the agreement allows the brothers to engage with potential partners freely.
As Ubisoft navigates this uncertain landscape, the potential buyout discussions with Tencent and the Guillemot family could reshape its future and restore investor confidence in the beleaguered company.
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