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 pivots to market global games, four sources with direct knowledge of the matter told Reuters.
China’s largest gaming and social media company, which bought a 5% stake in Ubisoft in 2018, has reached out to the French firm’s founding Guillemot family and expressed interest in increasing his stake in the company, the sources said.
It’s unclear how much more Tencent wants to own Ubisoft, valued at $5.3 billion, but Tencent aims to become the largest shareholder in the French company with an additional stake purchase, said two of the sources, who spoke to under condition of anonymity.
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Tencent hopes to buy an additional stake in Ubisoft, the maker of the blockbuster “Assassin’s Creed” video game franchise, from the Guillemot family, which owns 15 percent of the company, three of the sources said.
Tencent could 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.
Details of the deal have not yet been finalized and are subject to change, the sources said.
Ubisoft shares jumped 16% after the Reuters report in their biggest daily gain since 2010.
Shares in Guillemot Corp SA (GTCN.PA), the holding company in which the Guillemot family has a majority stake, traded up more than 7%.
Tencent will also look to acquire shares from Ubisoft’s public shareholders, two of the sources said, in a bid to increase its ownership and become the largest shareholder.
Around 80% of the French firm’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 of the Guillemot family could not immediately be reached for comment.
The planned stake purchase, Tencent’s last major overseas deal since the regulatory crackdown in late 2020, will help it offset some of the pressure in the domestic gaming market. China’s video game market, the largest in the world, has become very competitive.
“Tencent is very determined to complete the deal as 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 represent a 127% premium to the average share price of 44 euros over the past three months, and is close to its historic price ceiling of 108 euros in 2018.
Tencent has presented the Guillemot family with a term sheet – a non-binding offer outlining the basic terms and conditions of an investment – at a price “well above” the company’s current price to fend off potential competition, it said. say one of the sources.
The aggressive bid comes as global gaming powerhouses have rushed to snap up quality indie game makers in recent years, which are in short supply, two of the sources said.
Senior Tencent executives flew to France in May to meet the Guillemot family about the purchase, two of the people said.
DOMESTIC PRESSURES
China’s gaming regulator has not granted any new game licenses to Tencent at home since June last year, before freezing game approvals for nearly nine months. Since approvals resumed in April this year, none of the last four batches included the company. Read more
In May, Tencent reported that 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 that it would launch its flagship mobile game “Honor of Kings” globally later this 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.
It also owns 9 percent of British video game firm Frontier Developments and said last year 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 a lower operating profit for 2022-23 after the company reported operating income for 2021-22 that did not they had 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, graphics by Julien Ponthus; edited by Sumeet Chatterjee and Jason Neely
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