(AOF) – Ubisoft Entertainment SA has launched an issue of bonds convertible into and/or exchangeable for new or existing shares (OCEANEs) maturing in 2028 by way of a public offering intended exclusively for qualified investors, for a nominal amount of approximately 450 million euros. The net proceeds of the issue will finance the general needs of the video game publisher, and in particular will allow it to increase financial flexibility and refinance existing debt.
The bonds will have a nominal unit value of 100,000 euros and will bear an annual interest rate of 2.375%, payable annually in arrears on November 15 of each year (or the following business day if this date is not a business day). ) and for the first time on November 15, 2023. The bond conversion/exchange price will be set with a premium of between 40% and 45% above the reference price.
Tencent, which recently announced that it directly holds a stake of around 5.5% of the company’s share capital, has indicated its intention to participate in the issue by placing a subscription order representing 5% of the nominal amount of the issue. , to the final terms that will result from the process of building the order book.
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Key points
– The world’s third largest independent video game publisher created in 1986, holding the flagship brands Assassin’s Creed, Just Dance, Watch Dogs, The Division, Far Cry, For Honor, Tom Clancy, the Crew, Ghost Recon, Rainbow 6, Brawlhalla, etc.;
– Turnover of €2.1 billion split between North America for 51%, Europe for 30% and the rest of the world;
– 5 strengths for the business model: ownership of all the brands, integration of technological innovations in the R&D policy, control of internal production at 96%, then ramp-up of recurring revenues (64% provided by the “back catalogue”) and profitability via digitization;
– Presidency and general management of the 11-member board ensured by Yves Guillemot.
Challenges
– Strategic priorities:
– simplification of the organization, with global and no longer regional publishing,
– focus on the most ambitious opportunities – first Assassin’s Creed then Rainbow Six and the Division, with a target of €2 billion in revenue in 2027,
– portfolio strategy provided by the Global Creative Office;
– Innovation strategy:
– “Lead associate” for the 45 creative studios,
– advanced technologies (Anvil and Snowdrop for engines, Ubisoft connect and I3D.net for distribution), Web3, Voxel and cloud computing with Scalar, etc.,
– Motion Pictures for animation and feature films,
– support for start-ups: 6 to 10 incubated each year;
– Environmental strategy driven by the BEGES report:
– use of renewable energies for French and Canadian data centers,
– sequestration of GHG emissions and reduction of emissions per employee of 8.8% in March 2024 vs 2019;
– Spin-offs from the integration of Ketchapp, some games of which are integrated into Chinese Tencent’s Weixin laptop and development of a new Starwars game with Lucasfilm Game;
– Rapid rise of mobile in net booking (27%), which equals the annual turnover.
Challenges
– Seasonality of activity centered on September-January, hence the closure of accounts at the end of March;
– Strengthening of capital ties with Tencent with an option to increase its direct stake in Ubisoft to 9.99%;
– Cost optimization plan:
– at the end of 2022-23 stabilization of the workforce at the level of the end of 2021-22,
– during 2023-24: return of structural costs to the level of 2021-22 and maintenance of R&D at the level of 2022-23, the last year of significant growth;
– After a drop in sales and an operating loss in the 1st half, the 2022-2023 objective of significantly growing net booking and operating profit almost doubled to around €400 million.
Series of acquisitions
At the beginning of 2022, Microsoft acquired the American publisher Activision Blizzard (franchises “Call of Duty”, “World of Warcraft” and “Candy Crush”) for 69 billion dollars. This is the largest M&A transaction ever in tech. Following this operation, Microsoft will become the third largest player in the industry in terms of turnover behind Chinese Tencent and Japanese Sony. The latter recently acquired Bungie, creator of the “Halo” franchise, for $3.6 billion. As for the American publisher Take-Two (behind the flagship titles “Grand Theft Auto” and “Red Dead Redemption”), it has taken over Zynga, one of the biggest players in mobile video games with franchises such as “Farmville”, “Empires & Puzzles” and “Words With Friends”. The operation was made on the basis of a valuation of 12.7 billion dollars.