Ubisoft shares mark decline on stock market as chances for takeovers are harmed by the Tencent transaction.
The news that China’s Tencent Holdings will increase its investment in Ubisoft Entertainment on Wednesday sent the company’s shares plummeting. Analysts believe dimming the likelihood of a full sale of the French game developer.
In the agreement with Tencent Holdings, the developer of the “Assassin’s Creed” and “Tom Clancy’s” video game brands is valued at $10 billion, or about 80 euros per share. This is significantly higher than the stock’s closing price on Tuesday of 43.5 euros.
Tencent becomes the sole largest shareholder in Ubisoft, holding an 11% interest overall with the option of increasing it to 17%.
The transaction, which comes soon after NetEase’s acquisition of unlisted French video game developer Quantic Dream, reflects a wave of industry consolidation in which tech giants are acquiring independent players.
It also brings to an end a trying four-year period for Ubisoft, which was characterized by a string of delays for new video games and claims of sexual harassment that forced a shakeup in top management.
Although the founding Guillemot family of Ubisoft managed to stave off a raid by media conglomerate Vivendi in 2015, Ubisoft has long been considered a target for acquisition.
The Tencent transaction, according to traders and analysts, was advantageous for the French company but took away the speculative attraction of Ubisoft shares.
Tencent is now actually (there), hence the chances of an acquisition and battle for Ubisoft have ended, according to MidCap analyst Charles-Louis Planade.
Due to “disappointment that it may not be a takeover target as Tencent has raised (its) stake,” a London dealer claimed Ubisoft shares were down.
As a result of the deal, Tencent is now a party to the Guillemot family’s shareholder agreement. With only 5% voting rights, Tencent will acquire 49.9% of Guillemot Brothers Limited. This is the holding firm which holds the majority of the family’s 15% investment in Ubisoft.
Ubisoft stated in a statement on Tuesday night that Tencent had invested 300 million euros in Guillemot Brothers.
After five years, the Guillemot family will have the first opportunity to purchase any shares that Tencent choose to sell. Tencent promised, according to Ubisoft, not to expand its direct share in the French game developer above 9.99% for an eight-year term.
