EXCLUSIVE Tencent seeks larger stake in Assassin’s Creed maker Ubisoft – sources

HONG KONG, Aug 4 (Reuters) – Tencent Holdings Ltd (0700.HK) Plans to increase stake in French video game group Ubisoft Entertainment SA (UBIP.PA) Four sources familiar with the matter told Reuters that the Chinese gaming giant is focusing on the global gaming market.

The sources said that the largest social networking and gaming company in China, which bought a 5% stake in Ubisoft in 2018, has reached out to the Guillemot family founding the French company and expressed interest in increasing its stake in the company.

Two sources, who spoke on the condition of anonymity, said it was not clear how much Tencent wants to own in Ubisoft, worth $5.3 billion, but that Tencent aims to become the largest single shareholder in the French company by buying an additional stake.

Tencent hopes to buy part of the additional stake in Ubisoft, maker of the blockbuster “Assassin’s Creed” video game series, from the Guillemot family, which owns 15% of the company, according to three sources.

Two sources familiar with the internal discussions said Tencent had offered up to 100 euros ($101.84) per share for the additional stake. It paid 66 euros per share for 5% in 2018.

The sources said that the details of the deal have not yet been finalized and are subject to change.

Ubisoft’s shares closed up 11% Thursday, after surging as much as 21% earlier after a Reuters report in their biggest daily rise since 2004.

Stocks in Guillemot Corp SA (GTCN.PA)the holding company in which the Guillemot family holds a majority stake, closed up 7.3%.

Hong Kong-listed Tencent saw its shares fall 2% in morning trading on Friday while the Hang Seng Tech Index saw its shares fall 2% in morning trading on Friday. (.HSTECH) It was flat.

Two of the sources said Tencent will also seek to acquire shares from Ubisoft’s general shareholders, in a bid to consolidate its ownership into becoming the largest single shareholder.

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

All sources declined to publish their names because they are not authorized to speak to the media.

Tencent and Ubisoft declined to comment.

Representatives for Gilmo’s family could not immediately be reached for comment.

The planned stake purchase, Tencent’s latest major foreign deal since a regulatory crackdown in late 2020, will help offset some of the pressure in the local gaming market. China’s video game market, the largest in the world, has become a fierce competitor.

One person said, “Tencent is very intent on closing the deal because Ubisoft is a critical strategic asset for Tencent.”

At the cap of €100 per share, Tencent would be offering a 127% premium over the average share price of €44 over the past three months, close to the historic price ceiling of €108 in 2018.

One source said Tencent presented the Guillemot family a terms sheet – a non-binding offer that describes the basic terms and conditions of the investment – at a price “significantly higher” than the company’s current price to stave off potential competition.

The strong showing comes as global gaming powerhouses race to snap up makers of high-quality indie games in recent years, which are struggling with a dearth, two sources said.

Two people said that senior Tencent executives traveled to France in May to meet with the Guillemot family about the purchase.

home stress

The games regulator in China has not granted any new game licenses to Tencent at home since June last year, before it froze approvals for games for nearly nine months. Since it resumed approvals in April of this year, the company has not included any of the past four batches. Read more

In May, Tencent reported that domestic gaming revenue fell 1% in the first quarter while international gaming revenue was up 4%.

Tencent, which owns stakes in US video game developers Epic Games and Riot Games, said in June that it would launch its flagship mobile game “Honor of Kings” globally by the end of the year. Read more

In 2016, it bought a majority stake in mobile game maker Supercell, “Clash of Clans” for approximately $8.6 billion, one of the world’s largest gaming deals of all time.

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

Ubisoft, whose nicknames also include “Prince of Persia” and “Rainbow Six,” in May forecast lower operating profit for 2022-23 after the company announced operating income for 2021-22 that didn’t come up with an estimate. Read more

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Additional reporting by Pamela Barbaglia in London, Sudeep Kar Gupta and Richard Love in Paris. Editing by Sumit Chatterjee, David Evans and Jacqueline Wong

Our criteria: Thomson Reuters Trust Principles.