As the Chinese gaming giant makes a shift to the international gaming market, Tencent Holdings Ltd aims to increase its stake in French video game company Ubisoft Entertainment SA, according to four persons with direct knowledge of the situation who spoke to Reuters.
According to the sources, China’s biggest social network and gaming company, which acquired a 5% share in Ubisoft in 2018, has contacted the family that founded the French company and showed interest in boosting its ownership stake.
It’s unclear how much more Tencent intends to invest in Ubisoft, which is valued at $5.3 billion, but two sources claimed Tencent wants to buy a larger interest to become the sole shareholder of the French company.
According to three of the sources, Tencent intends to acquire a portion of the additional share in Ubisoft from the Guillemot family, who already own 15% of the company and are the creators of the popular “Assassin’s Creed” video game franchise.
According to two sources familiar with the internal negotiations, Tencent may make an offer of up to 100 euros ($101.84) per share to purchase the additional stake. In 2018, it invested 66 euros per share to acquire a 5 percent ownership.
Following the Reuters article, Ubisoft share prices increased by more than 15%. Shares of the holding company Guillemot Corp SA, in which the Guillemot family holds the bulk of the shares, were trading more than 7% higher.
In order to increase its shareholding and take over as the sole major shareholder, two of them stated that the Chinese company would also want to buy shares from Ubisoft’s public shareholders.
According to the French company’s most recent annual report, public shareholders possess almost 80% of its shares.
Because they are not authorised to speak to the media, all of the sources declined to give their names.
Ubisoft and Tencent chose not to comment.
No one from the Guillemot family could be reached right away for comment.
According to the persons who spoke on the condition of anonymity because the information is private, the specifics of the deal have not yet been finalised and are susceptible to change.
The anticipated share acquisition will aid Tencent in reducing some of the pressures in the domestic gaming sector. It is the company’s most significant international transaction since a regulatory crackdown in late 2020. The biggest video game market in the world, China, has seen intense competition.
“Tencent is very determined to nail down the deal as Ubisoft is such an important strategic asset for Tencent,” according to a source.
Tencent’s offer, at the top end of 100 euros per share, will represent a premium of 127% over the stock’s 44-euro three-month average price and come near to its previous price cap of 108 euros in 2018.
According to one of the persons, Tencent has submitted a term sheet to the Guillemot family that outlines the fundamental terms and conditions of an investment and has a price that is “far beyond” the company’s existing pricing to fend off possible rivals.
The aggressive offer also comes at a time when major international gaming companies have been scrambling to acquire excellent independent game developers in recent years, according to two of the people.
According to two of the persons, senior executives from Tencent travelled to France in May to discuss the purchase with the Guillemot family.
Since June of last year, when gaming approvals were temporarily suspended for nearly nine months, Tencent has not received any new game licences from China’s gaming authority for domestic release. None of the previous four batches have featured the corporation since it commenced approvals in April of this year.
Tencent revealed in May that their domestic game revenue fell 1% in the first quarter while it increased 4% internationally.
Tencent said in June that its main mobile game “Honor of Kings” would be made available worldwide by the end of the year. Tencent owns holdings in American video game creators Epic Games and Riot Games.
One of the largest gaming acquisitions in history took place in 2016 when it paid approximately $8.6 billion for a majority stake in Supercell, the developer of the “Clash of Clans” mobile game.
It also announced last year that it will pay $1.3 billion to acquire another British developer, Sumo. It also owns 9% of the UK video game company Frontier Developments.
Prince of Persia and Rainbow Six developer Ubisoft predicted a reduced operating profit for 2022–2023 in May after the business revealed operational income for 2021–2022 that fell short of expectations.