China’s Tencent eyes bigger stake in French video game maker Ubisoft

Tencent Holdings Ltd plans to increase its stake in the French video game group Ubisoft Entertainment SA as the Chinese gaming giant pivots into the global gaming market, four sources with direct knowledge of the case told Reuters.

China’s largest social media and gaming company, which bought 5% stake in Ubisoft in 2018 contacted the founding family of the French company Guillemot and expressed interest in increasing its stake in the business, the sources said.

It is not clear how much more Tencent wants to own in Ubisoftvalued at $5.3 billion, but Tencent aims to become the first sole shareholder of the French company with additional capital stake buy, two of sources said on condition of anonymity.

Tencent hopes to buy some of the stake in Ubisoftthe maker of the successful “Assassin’s Creed” video game franchise, owned by the Guillemot family, which owns 15% of the company, three of the sources said.

Tencent could offer up to 100 euros ($101.84) per share to acquire the staketwo of sources having knowledge of the internal discussions, said. He paid 66 euros per share for the 5% stake in 2018.

The details of the agreement are not yet finalized and are subject to change, the sources said.

Ubisoft Shares jumped 16% after Reuters reported their biggest daily gain since 2010.

Shares of Guillemot Corp SA, the holding company in which the Guillemot family is the majority shareholder, traded more than 7%.

Tencent will also seek to acquire shares from public shareholders of Ubisofttwo of sources said, in a bid to strengthen its ownership and become the single largest shareholder.

About 80% of the French company’s shares are held by public shareholders, according to its latest annual report.

All the sources declined to be named as they are not authorized to speak to the media.

Tencent and Ubisoft declined to comment.

Representatives of the Guillemot family could not immediately be reached for comment.

The expected stake purchase, TencentThe latest major foreign deal since a regulatory crackdown at the end of 2020, will help offset some of the pressures in the domestic gaming market. The Chinese video game market, the largest in the world, has become extremely competitive.

Tencent is very determined to close the deal as Ubisoft is such an important strategic asset for Tencent“said one of the people.

Up to a ceiling of 100 euros per share, TencentThe offer will be a 127% premium to the share’s average price of 44 euros over the past three months, and is close to its historical price cap of 108 euros in 2018.

Tencent submitted to the Guillemot family a term sheet – a non-binding offer outlining the basic terms and conditions of an investment – with a price “significantly higher” than the company’s current price to ward off potential competition, one of the sources said.

Aggressive bid comes as global gaming powerhouses rush to buy quality indie game makers in recent years, which are in short supply, two of the sources said.

TencentSenior executives are flying to France in May to meet with the Guillemot family about the purchase, two of the people said.

Internal pressures

The Chinese gaming regulator has not granted any new gaming licenses to Tencent at home since June last year, before freezing game approvals for almost nine months. Since it resumed approvals in April this year, none of the last four batches included the company.

In May, Tencent reported that its domestic game revenue fell 1% in the first quarter, while international game revenue increased 4%.

Tencentwho has stakes in the United States, video game developers Epic Games and Riot Games, announced in June that they would release their flagship mobile game “Honor of Kings” globally by the end of the year.

In 2016, he bought a majority stake in the mobile game “Clash of Clans” maker Supercell for approximately $8.6 billion, one of the biggest gaming deals in the world.

It also owns 9% of British video game company Frontier Developments and said last year it would buy fellow British developer Sumo in a $1.3 billion deal.

Ubisoftwhose titles also include “Prince of Persia” and “Rainbow Six,” in May forecast lower operating profit for 2022-23 after the company reported operating profit for 2021-22 that missed estimates.

Reuters

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