HONG KONG, August 4 (Reuters) – Tencent Holdings Ltd (0700.HK) plans to increase its stake in French video game group Ubisoft Entertainment SA (UBIP.PA) as the Chinese game giant pivots into the global games market, four sources with direct knowledge of the matter told Reuters.
Sources say China’s largest social network and game company, which bought a 5% stake in Ubisoft in 2018, has contacted the French company’s Guillemot founding family and expressed interest in increase its stake in the company.
It’s unclear how much more Tencent wants to own in Ubisoft, which is worth $5.3 billion, but Tencent aims to become the French company’s sole shareholder with the purchase of additional shares, two unnamed sources told Reuters. know.
Sign up now for FREE unlimited access to Reuters.com
Tencent is hoping to acquire an additional stake in Ubisoft, maker of the blockbuster video game series “Assassin’s Creed,” from the Guillemot family, which owns a 15% stake in the company, three sources said. .
Tencent could offer up to 100 euros ($101.84) per share to buy more shares, two of the sources with knowledge of the internal discussions said. It paid 66 euros per share for a 5% share in 2018.
Sources said the details of the deal are yet to be finalized and are subject to change.
Shares of Ubisoft jumped 21% following the Reuters report at 1008 GMT and set for its biggest daily gain since 2004.
Shares in Guillemot Corp SA (GTCN.PA)The parent company, in which the Guillemot family owns a majority stake, was trading up 10.3% at 14.14 euros per share at 12:40 GMT and is set to post its biggest daily gain since January.
Tencent will also seek to buy back shares from Ubisoft’s public shareholders, two of the sources said, aiming to increase ownership and become the sole largest shareholder.
About 80% of the shares of the French company are owned by public shareholders, according to the company’s latest annual report.
All sources declined to be named because they were not authorized to speak to the media.
Tencent and Ubisoft declined to comment.
Representatives for the Guillemot family could not be immediately reached for comment.
The planned share purchase, Tencent’s biggest foreign acquisition since a regulatory crackdown in late 2020, should help it offset some of the pressure in the domestic gaming market. China’s world’s largest video game market has become fiercely competitive.
“Tencent is very determined to reach this deal because Ubisoft is an important strategic asset for Tencent,” one of these people said.
At a peak of 100 euros per share, Tencent’s offer would be 127% higher than the stock’s average price of 44 euros over the past three months and close to the historic ceiling price of 108 euros in 2019. 2018.
Tencent sent the Guillemot family a terms sheet – a non-binding offer that describes the basic terms and conditions of an investment – at a price “higher than” the company’s current price to prevent block potential competition, one of the sources said.
The aggressive offer comes as global game makers have been scrambling to find quality indie game makers in recent years, which has been scarce, two of the sources said. know.
Two senior Tencent executives flew to France in May to meet with the Guillemot family about the purchase, two of them said.
LOCAL PRESS
China’s gaming regulator hasn’t issued any new game licenses to Tencent in its home country since last June, before it froze game approvals for nearly nine months. Since it went on to be approved in April of this year, none of the previous four lots include the company. read more
In May, Tencent reported that its domestic game revenue fell 1% in the first quarter while international game revenue increased 4%.
Tencent, which has stakes in US video game developers Epic Games and Riot Games, said in June it would release its flagship mobile game “Honor of Kings” globally. later this year. read more
In 2016, it bought a majority stake in “Clash of Clans” mobile game maker Supercell for about $8.6 billion, one of the world’s largest game deals ever. .
It also owns a 9% stake in British video game company Frontier Developments and said last year it would buy another British developer, Sumo, in a deal worth $1.3 billion. read more
Ubisoft, whose titles also include “Prince of Persia” and “Rainbow Six,” in May forecast lower operating profit for 2022-23 after the company reported operating income for 2021. -22 without reaching the estimate. read more
(1 dollar = 0.9819 euros)
Sign up now for FREE unlimited access to Reuters.com
Additional reporting by Pamela Barbaglia in London, Sudip Kar-Gupta and Richard Lough in Paris; Editing by Sumeet Chatterjee, Jason Neely and David Evans
Our standards: Thomson Reuters Trust Principles.