Shares of Ubisoft Entertainment SA (LON:0NVL) (EPA:UBIP) jumped 16% Friday as the company's shareholders, including the founding Guillemot family, are engaged in discussions regarding a potential buyout of the leading French video game developer, Reuters reported. The Guillemot family, the largest shareholder group, is exploring ways to structure a buyout that would not dilute their control of the company known for popular titles such as Assassin's Creed and Far Cry.
The family has been negotiating with Tencent Holdings Ltd (F:NNND) (HKG:0700), a major shareholder and China's top social network and gaming company, as well as other investors, to secure financing for a management-led buyout. Despite these discussions, the Guillemot family has expressed a strong desire to maintain its current level of control over Ubisoft (EPA:UBIP), which also produces the Just Dance and Tom Clancy's video game series.
Tencent, which holds the second-largest share in Ubisoft, is considering whether to join the buyout and potentially increase its stake. The Chinese giant has requested more influence over board decisions, including those related to cash flow, as a condition for financing the deal. However, an agreement with the Guillemot family on this matter has not been reached.
The ongoing talks are also a strategic move by Tencent to prevent a potential hostile takeover of Ubisoft by other parties. Although Tencent is weighing its options, it might choose not to raise its stake in Ubisoft, believing its current direct holding of almost 10% is adequate for its gaming business collaboration with the company.
A Ubisoft spokesman reiterated the company's commitment to acting in the best interest of all stakeholders and stated that the company is considering all strategic options. This statement follows Ubisoft's previous acknowledgment in October that it routinely evaluates strategic alternatives but declined to comment on specific reports of buyout interest.
The potential buyout discussions occur as Ubisoft faces pressure from minority shareholders, including AJ Investments, for a private take-over or sale to a strategic investor due to the company's declining stock price. Ubisoft's shares hit a decade low in September following a cut in sales forecasts and the delay of the "Assassin’s Creed Shadows" release.
Recently, Ubisoft announced the cancellation of its XDefiant game, leading to the closure of its production studios in San Francisco and Osaka and a scale-down in Sydney.
The Guillemot family currently holds a 15% ownership in Ubisoft, while Tencent owns just under 10%. As of the end of April, the family had about 20.5% of Ubisoft's net voting rights, with Tencent holding 9.2%, as reported in the company's latest annual report.
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