Tencent and the founders of Ubisoft, the Guillemot family, are considering buying out the French game developer after it has lost over half of its market value.
According to insiders, the Chinese tech company and the Guillemot Brothers have been in discussions with consultants to explore ways to stabilize Ubisoft and increase its value. One option reportedly under consideration is a merger.
On Friday, Ubisoft's stock rose by 33%. However, the company's shares have fallen by approximately 40% this year. The company has a market capitalization of around $2 billion. According to the latest annual report, Tencent held 9.2% of the voting rights in Ubisoft as of the end of April, while the Guillemot family owned about 20.5%.
Some minority shareholders, including AJ Investments, have advocated for either a private equity status or the sale of Ubisoft to a strategic investor amid the stock price decline. The discussions are still in the initial stages, and Tencent and the Guillemots are also exploring other options.
Last month, Ubisoft's stock plummeted to its lowest level in over a decade after the company lowered its forecast due to weaker-than-expected sales and delays to the highly anticipated game Assassin's Creed Shadows. Over the last few years, the company has struggled to recover from the pandemic-era crisis that led to delays and cancellations of games.
Several private equity firms, including Blackstone Inc. and KKR & Co., explored potential offers for Ubisoft in 2022 amid a wave of significant deals in the video game industry. Later that year, the founders' family formed a partnership with Tencent, which acquired 49.9% of the Guillemot Brothers holding company in addition to a direct stake in Ubisoft.
Analysts have seen such a scheme as a way to allow the brothers to remain at the helm of Ubisoft. Tencent's stake is capped at 10% without veto rights. Under the agreement, Tencent is also restricted from selling its shares in Ubisoft for five years, after which the Guillemot family has the right of first refusal. The arrangement still allows the brothers to communicate and work with anyone.
Source: Bloomberg
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