Breaking: Tencent wants to buy out Ubisoft amid falling shares, poor sales and delays

Tencent and Ubisoft’s founders, the Guillemot family, are considering a buyout of the French game developer after losing more than half of its market value.

According to insiders, the Chinese tech company and Guillemot Brothers have been talking to consultants to explore ways to stabilize Ubisoft and increase its value. According to the source, one of the possibilities discussed was a merger.

On Friday, Ubisoft shares rose by 33%. Overall, Ubisoft shares have fallen by about 40% this year. The company’s market capitalization is about $2 billion. According to the company’s latest annual report, Tencent held 9.2% of the net voting rights in Ubisoft at the end of April, while the Guillemot family held approximately 20.5%.

Some minority shareholders, including AJ Investments, have been pushing for either a private equity status or a sale of Ubisoft to a strategic investor amid the falling share price. Consideration is at an early stage, with Tencent and Guillemot also exploring other alternatives.

Last month Ubisoft’s shares fell to their lowest level more than a decade after the company lowered its forecast due to weaker-than-expected sales and delay of the long-awaited Assassin’s Creed Shadows game. Over the past few years, the company has been trying to recover from the pandemic-era crisis that led to delays and game cancellations.

Several private equity firms, including Blackstone Inc. and KKR & Co. have been exploring potential offers for Ubisoft in 2022 amid a series of major deals in the video game industry. Later that year, the founding family entered into a partnership with Tencent, which acquired a 49.9% stake in the Guillemot Brothers holding company in addition to a direct stake in Ubisoft.

Analysts saw this scheme as a way to allow the brothers to remain at the helm of Ubisoft. Tencent’s share is limited to 10% without the right of operational veto. Under the agreement, Tencent also could not sell its shares in Ubisoft for five years, after which the Guillemot family has a right of first refusal. The agreement still allows the brothers to communicate and work with whomever they want.

Source: Bloomberg