Tencent has increased its stake in Ubisoft, the French game maker behind popular franchises such as Assassin’s Creed. But analysts said it closed the door on a full takeover of the company.
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Shares of game developers Ubisoft It fell more than 16% on Wednesday as prospects for a full takeover dimmed following the move by the Chinese tech giant. Tencent increase its stake in the company.
The two companies announced on Tuesday that Tencent has invested 300 million euros ($296.9 million) in Guillemot Brothers Limited, which equates to a 49.9% stake in the company. Tencent only gets 5% voting rights in the company.
Guillemot Brothers Limited is controlled by the Guillemot family and is the entity that controls the majority of the family’s approximately 15% stake in Ubisoft.
The Guillemot brothers founded Ubisoft in 1986 and fought hard to keep the company independent and protected from takeovers.
Tencent’s investment values Ubisoft shares at €80 each, an 83% premium to Tuesday’s closing price, and gives it an indirect stake in the French game developer.
Analysts say the move effectively closes the door to a full takeover of Ubisoft by any party, something investors have been waiting for.
“This transaction means that any full sale of Ubisoft to a strategic or financial buyer is highly unlikely. In our view, this should be viewed as a net negative for the stock (though not for the company itself),” analysts Cowen said in a note on Tuesday. said in the note.
As part of the deal, Tencent can increase its direct stake in Ubisoft to 9.99% of the equity or voting rights, from the current 4.5%. But Tencent will not be able to sell its shares for five years, and will not be able to increase its stake in Ubisoft to more than 9.99% for eight years. This effectively rules out a full takeover of the gaming firm.
Ubisoft’s drama began in 2015 when French media conglomerate Vivendi bought a stake in the European gaming firm, eventually becoming its largest shareholder. But the Guillemot family was determined to keep the company independent.
In 2018, after a three-year battle, Vivendi dropped its pursuit of Ubisoft. Tencent has stepped in to buy some of the shares of Ubisoft and the Chinese tech giant, which Vivendi has loaded. got a 5% stake in the game company.
Ubisoft faced a number of problems including allegations of sexual harassment and the lack of new hit titles.
Tencent’s investments continue a plethora of deals in the video game space this yearespecially from Asian firms, started with Microsoft’s he suggested A $68.7 billion purchase of Activision Blizzard followed in January Sony’s takes over Bungie, creator of the hit games Halo and Destiny.
Tencent, based in Shenzhen, China, has become one of the world’s biggest gaming companies over the years by buying and investing in small studios with popular global titles, including League of Legends maker Riot Games.
Tighter gaming regulation in China has pushed Tencent and its rival NetEase tone should expand abroad due to investments and purchases.
Ubisoft is known for some popular franchises including Assassin’s Creed and Rainbow Six. Ubisoft has scheduled an event for Saturday to reveal details about the upcoming games.
Tencent has typically helped companies it invests in to operate independently, but it offered help expanding its name in China and in mobile, where it is typically strong.
Martin Lau, president of Tencent, said the two companies will continue to “develop immersive gaming experiences” and bring Ubisoft’s most popular franchises to mobile devices.
