Ubisoft entertain: Thanks to Tencent, the Guillemot family is erecting a bulwark against a takeover of Ubisoft… in the short term


(BFM Bourse) – The Chinese group has granted a premium of almost 90% to take 49.9% of the holding company of the Guillemot family and will be able to double its direct stake. But for the time being, Ubisoft shares are losing a good deal of their speculative appeal. As a result, the action plunged on the Paris Stock Exchange.

“Game over” for Ubisoft speculation. Or almost. The video game publisher collapsed by 14% on the Paris Bourse on Wednesday to 37,510 euros around 11:30 a.m., falling to its lowest since April.

The agreement announced Tuesday evening between the Guillemot founding family and the Chinese video game and digital juggernaut Tencent has investors cringing.

Tencent will pay a total of 300 million euros to take a minority stake of 49.9% of the capital (and 5% of the voting rights) in Guillemot Brothers Limited, the holding company of the Guillemot family. This operation was carried out on the basis of a price per Ubisoft share of 80 euros, ie a very high premium of 86% compared to the closing price on Tuesday evening.

Above all, Tencent also obtained authorization from Ubisoft’s board of directors to more than double its current direct stake and thus increase it from 4.5% to 9.99%. However, the Chinese company will not be able, according to the agreement reached on Tuesday, to exceed this last threshold for eight years.

A good operation for the Guillemots

Tencent is also added to the concert formed by the Guillemot family. Including the securities of Guillemot Brothers Limited, those held individually by the Guillemots, and the shares of Tencent, the concert currently owns 19.8% of the capital and 24.9% of the voting rights.

Ubisoft has also warned that the concert could further strengthen (which would be logical in the event that Tencent increases its stake) to go up to 29.9% of the capital or voting rights, just below the threshold of 30% which obliges to trigger a public purchase offer (OPA) on the whole of the capital.

“It is therefore an excellent operation for the Guillemot family, which monetizes a large part of its stake at a valuation level of almost double the current market value. All this while retaining control of the company”, underlines Charles Planade. , of TP ICAP Midcap Partners, in a note.

For other wearers, on the other hand, it is a cold shower. “For minority shareholders who wanted to play a takeover of Ubisoft by a competitor or a bigger player (like a GAFAM) it’s a big disappointment. The Guillemots have clearly strengthened their blocking power via this operation”, explains Valentin Mory , analyst at the independent research firm AlphaValue.

A weakened speculative character

“It is always possible that a buyer will come and make an offer, and in this case, the price of 80 euros granted by Tencent would constitute a floor. But the scenario of a takeover offer in the short or medium term has seen its probability to decrease sharply, hence again the reaction of the market”, he continues.

The video game market is currently in full consolidation with many takeovers of small players by larger ones. Activision Blizzard’s takeover project, known for “Starcraft”, “Overwatch” or “Call of Duty”, illustrates this perfectly. Recently, the French Quantic Dream was bought by a Chinese group, NetEaseGames.

The multiplication of these operations, the quality of Ubisoft’s licenses and its profile as an independent studio had led the market to hope for a potential takeover offer, and many rumors occasionally supported the share price.

The operation between Tencent and the Guillemot family “now removes any speculative interest in the title, the concert now holding a stake which prevents any hostile operation”, thus judges Invest Securities.

Tencent prepares for the future

The Guillemot family has therefore strengthened its fortress against potential unfriendly investors. The CEO, Yves Guillemot, however, did not want to close the door to a takeover. “We have been on the same line for months: in the event of an offer by a third party, this will be examined by the board of directors who always have the capacity to accept or refuse this one”, declared the CEO of Ubisoft, Echoes.

Tencent for its part “indirectly becomes the largest shareholder of Ubisoft with nearly 12% of the capital and therefore puts itself in a position of strength to ward off other potential predators”, writes Charles-Louis Planade. The analyst also believes that the speculative appeal of Ubisoft is clearly diminishing, and has reduced its price target to 80 euros against 119 euros while reiterating its recommendation to buy.

Tencent is now in pole position to potentially eventually buy Ubisoft. The agreement reached on Tuesday obliges it, of course, to wait eight years to strengthen its participation. Unless the Guillemot family decides otherwise. “The agreement announced Tuesday evening shows that the Guillemot family can completely reverse course since it amends a previous agreement, from 2018, which prohibited Tencent from increasing its stake”, underlines Valentin Mory of AlphaValue.

There remains the intrinsic qualities of Ubisoft which, with the fall of this Tuesday, seem more depreciated than ever. “The fact that Tencent is taking a stake is reassuring for Ubisoft’s fundamentals because it shows that the Chinese shareholder is confident in the group’s ability to raise the bar while maintaining the Guillemot strategy”, notes Valentin Mory on this point. .

“The arrival of many games in the coming months, the end of the significant increase in costs and capex [dépenses d’investissements, NDLR] and an acceleration of the new cycle give the family a glimpse of good prospects for the group, a probable reason for their only partial exit at this stage”, judge for his part Charles-Louis Planade.

The group will hold its “Ubisoft Forward” conference on Saturday, which will be an opportunity for the publisher to take stock of its licenses and releases.

Julien Marion – ©2022 BFM Bourse

Are you following this action?

Receive all the information about UBISOFT ENTERTAIN in real time:




Source link -84