EXCLUSIVE Tencent seeks bigger stake in 'Assassin's Creed' maker Ubisoft - sources

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

HONG KONG, Aug 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 gaming giant turns to the global gaming market, four sources with direct knowledge of the matter told Reuters.

China’s largest social network and games company, which bought a 5% stake in Ubisoft in 2018, has reached out to the French company’s founding Guillemot family and expressed interest in increasing its stake in the company, the sources said.

It is not clear how much more Tencent wants to own in Ubisoft, valued at $5.3 billion, but Tencent aims to become the single largest shareholder in the French company with another stock purchase, two of the sources said, on the condition that they anonymous.

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Tencent hopes to buy some of the additional stake in Ubisoft, maker of the blockbuster “Assassin’s Creed” franchise, from the Guillemot family, which owns 15% of the company, three of the sources said.

Tencent may offer up to 100 euros ($101.84) per share to acquire the additional stake, two of the sources with knowledge of the internal discussions said. It paid €66 per share for the 5% stake in 2018.

The details of the deal are not yet finalized and could change, the sources said.

Ubisoft shares closed up 11% on Thursday, after rising as much as 21% earlier after Reuters reported its biggest daily gain since 2004.

Shares in Guillemot Corp SA (GTCN.PA)the holding company in which the Guillemot family owns the majority of the shareholding, ended 7.3% higher.

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

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

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

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

Tencent and Ubisoft declined to comment.

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

The planned stake purchase, Tencent’s last major overseas deal since a regulatory crackdown in late 2020, will help it offset some of the pressure in the domestic gaming market. China’s video game market, the world’s largest, has become fiercely competitive.

“Tencent is very committed to closing the deal because Ubisoft is such an important strategic asset for Tencent,” one of the people said.

At the upper end of 100 euros per share, Tencent’s offer will be a 127% premium to the stock’s 44-euro average price over the past three months, and is close to its 2018 all-time high of 108 euros.

Tencent has submitted a term sheet to the Guillemot family – a non-binding offer outlining the basic terms of an investment – at a price “well above” the company’s current price to fend off potential competition, one of the sources said.

The aggressive bid comes as global gaming powerhouses rush to snap up high-quality independent game makers in recent years, which have been in short supply, two of the sources said.

Tencent’s senior executives flew to France in May to meet with the Guillemot family about the purchase, two of the people said.

HOME PRESS

China’s gaming regulator has not granted any new gaming licenses to Tencent domestically since last June, before it froze gaming approvals for nearly nine months. Since it resumed approvals in April this year, none of the last four batches included the company. Read more

In May, Tencent reported that its domestic game revenue fell 1% in the first quarter while international game revenue rose 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 by the end of the year. Read more

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

It also owns 9% of British video game company Frontier Developments and last year said it would buy another British developer Sumo in a $1.3 billion deal. 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 profit for 2021-22 that missed estimates. Read more

($1 = 0.9819 euros)

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Additional reporting by Pamela Barbaglia in London, Sudip Kar-Gupta and Richard Lough in Paris; Editing by Sumeet Chatterjee, David Evans and Jacqueline Wong

Our standards: Thomson Reuters Trust Principles.

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