Tencent Holdings Ltd plans to increase its stake in French video game group Ubisoft Entertainment SA as the Chinese gaming giant pivots in the global gaming market, four sources with direct knowledge of the matter told Reuters.
China’s largest social media and gaming company, which acquired a 5% stake in Ubisoft in 2018, contacted the founding family of French company Guillemot and expressed interest in increasing its stake in the company, it said. the sources.
It’s unclear how much more Tencent wants to hold in Ubisoft, valued at $5.3 billion, but Tencent aims to become the largest shareholder in the French company with an additional stake purchase, two of the sources said, speaking. on condition of anonymity.
Tencent hopes to buy some of the additional stake in Ubisoft, maker of the hit “Assassin’s Creed” video game franchise, from the Guillemot family, which owns 15% of the company, three of the sources said.
Tencent could offer up to 100 euros ($101.84) per share to acquire the additional stake, said two of the sources familiar with the internal discussions. He paid 66 euros per share for the 5% stake in 2018.
Details of the deal are yet to be finalized and are subject to change, the sources said.
Ubisoft shares closed 11% higher on Thursday, having risen 21% earlier after Reuters reported their biggest daily gain since 2004.
Shares of Guillemot Corp SA, the holding company in which the Guillemot family owns the majority of shares, ended up 7.3%.
Hong Kong-listed Tencent saw its shares fall 2% in morning trading on Friday as the Hang Seng Tech index was flat.
Tencent will also seek to acquire shares from public shareholders of Ubisoft, two of the sources said, in a bid to strengthen its ownership and become the single largest shareholder.
About 80% of the French company’s shares are held by public shareholders, according to its latest annual report.
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 foreign deal since a regulatory crackdown in late 2020, will help it offset some of the pressures in the domestic gaming market. The Chinese video game market, the largest in the world, has become extremely competitive.
“Tencent is very committed to completing the deal because Ubisoft is such an important strategic asset to Tencent,” one of the people said.
At the high of 100 euros per share, Tencent’s offer will be a 127% premium to the share’s average price of 44 euros over the past three months, and is close to its historical price cap at 108 euros. in 2018.
Tencent submitted a term sheet – a non-binding offer outlining basic terms and conditions for an investment – to the Guillemot family with a price “well above” the company’s current price to ward off potential competition, it said. one of the sources.
The aggressive offer comes as global gaming powerhouses have rushed to recruit 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 with the Guillemot family about the purchase, two of the people said.
China’s gaming regulator hasn’t issued any new gaming licenses to Tencent at home since June last year, before freezing gaming approvals for nearly nine months. Since it resumed approvals in April this year, none of the last four batches included the company.
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, announced in June that it would launch its flagship mobile game “Honor of Kings” globally by the end of the year.
In 2016, he bought a controlling stake in “Clash of Clans” mobile game maker Supercell for around $8.6 billion, one of the biggest gaming deals ever in the world.
It also owns 9% of British video game company Frontier Developments and said last year it would buy fellow British developer Sumo in a $1.3 billion deal.
Ubisoft, whose titles also include ‘Prince of Persia’ and ‘Rainbow Six’, in May forecast lower operating profit for 2022-23 after the company reported missing operating profit for 2021-22. to estimates.