HONG KONG, Aug 4 (Reuters) – Tencent Holdings Ltd (0700.HK) French video game group Ubisoft Entertainment plans to increase its stake in SA (UBIP.PA) As the Chinese gaming giant turns to the global gaming market, four sources with direct knowledge of the matter told Reuters.
Sources stated that China’s largest social network and game company, which bought 5% of Ubisoft’s shares in 2018, has reached the French company’s founding Guillemot family and is interested in increasing its stake in the company.
It’s unclear how much more Tencent wants to own in Ubisoft, worth $5.3 billion, but two sources, speaking on condition of anonymity, said Tencent aims to become the French company’s largest single shareholder with an additional share purchase.
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Tencent hopes to acquire a portion 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 company, three of the sources said.
Two sources familiar with the internal discussions said Tencent could bid up to €100 ($101.84) per share to buy the additional stake. In 2018, he paid 66 euros per share for 5% of the shares.
Sources said the details of the deal are yet to be finalized and could change.
Ubisoft shares are up 21% after the Reuters report at 1008 GMT and are set for their biggest daily gain since 2004.
Shares in Guillemot Corp SA (GTCN.PA)The holding company, in which the Guillemot family holds a majority stake, was poised for its biggest daily rise since January, up 10.3% at 1240 GMT.
Two of the sources said it will seek to buy shares from Ubisoft’s publicly traded shareholders in an effort to increase Tencent’s ownership and become the largest single shareholder.
According to its latest annual report, about 80% of the French firm’s shares are owned by public shareholders.
All sources declined to be named as they were not authorized 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 share purchase, Tencent’s last major outside deal since a regulatory crackdown in late 2020, will help offset some of the pressure in the local gaming market. China’s video games market, the world’s largest, has become extremely competitive.
“Tencent is very determined to seal the deal, as Ubisoft is a very important strategic asset to Tencent,” one of the people said.
At the top of 100 euros per share, Tencent’s offer will be a 127% premium to the stock’s average price of 44 euros over the past three months, close to the historical price ceiling of 108 euros in 2018.
One source said Tencent has submitted a terms document to the Guillemot family, a non-binding offer that explains the key terms and conditions of an investment at “well above” the company’s current price to avoid potential competition.
Two of the sources said the aggressive bid came as global gaming powerhouses rushed to catch up with quality indie game makers that have been lacking in recent years.
Two people said Tencent’s senior executives flew to France in May to talk to the Guillemot family about the acquisition.
INTERNAL PRESSURES
China’s game regulator hasn’t given Tencent new game licenses at home since June last year, before freezing game approvals for nearly nine months. Since it began approvals again 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 will release its flagship mobile game “Honor of Kings” globally by the end of the year. Read more
In 2016, “Clash of Clans”, one of the world’s largest gaming deals, acquired a majority stake in mobile game maker Supercell for approximately $8.6 billion.
It also owns 9% of UK video game firm Frontier Developments and said last year it would buy another British developer, Sumo, in a $1.3 billion deal. Read more
Ubisoft, whose titles include “Prince of Persia” and “Rainbow Six”, is forecasting lower operating profit for 2022-23 in May after reporting operating income that missed forecasts for 2021-22. Read more
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Additional reports by Pamela Barbaglia in London, Sudip Kar-Gupta and Richard Lough in Paris; Editing by Sumeet Chatterjee, Jason Neely and David Evans
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