(BFM Bourse) – The Chinese group has granted a premium of nearly 90% to take 49.9% of the family holding Guillemot and will be able to double its direct participation. But in the immediate future, the action Ubisoft loses much of its speculative appeal. As a result, the action plunged on the Paris Stock Exchange.
“Game over” for speculation on Ubisoft. 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 founding family Guillemot and Chinese gaming and digital juggernaut Tencent is making investors cringe.
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 family holding Guillemot. This operation was carried out on the basis of a price per share Ubisoft of 80 euros, a very high premium of 86% compared to the closing price on Tuesday evening.
Especially Tencent also obtained the authorization of the board of directors ofUbisoft to more than double its current working interest 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 family Guillemot. Counting the titles of Guillemot Brothers Limited, those held individually by the Guillemotand Tencent shares, 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.
“So it’s a great operation for the family. Guillemot which monetizes a large part of its stake on a valuation level at nearly double the current market value. All while retaining control of the company,” said 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 wish to play a buyout ofUbisoft by a competitor or a bigger player (like a GAFAM) it’s a big disappointment. The Guillemots have significantly strengthened their blocking power through this operation”, explains Valentin Mory, analyst at the independent research office 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 the licenses ofUbisoft and its independent studio profile had led the market to hope for a potential takeover offer, and numerous rumors occasionally supported the share price.
The operation between Tencent and the family Guillemot “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
Family Guillemot has therefore reinforced its fortress in the face of 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 ofUbisoft, to Echoes.
Tencent for its part “indirectly becomes the largest shareholder ofUbisoft 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 ofUbisoft clearly decreasing, and reduced its price target to 80 euros against 119 euros while reiterating its recommendation to buy.
Tencent is therefore now in pole position to potentially buy, in the long term, Ubisoft. The agreement reached on Tuesday obliges it, of course, to wait eight years to strengthen its participation. Unless the family Guillemot decides otherwise. “The agreement announced on Tuesday evening shows that the family Guillemot can completely reverse since it comes to amend a previous agreement, from 2018, which prohibited Tencent from increasing its participation”, underlines Valentin Mory of AlphaValue.
Remain the intrinsic qualities ofUbisoft which, with the fall of this Tuesday, seem more depreciated than ever. “The fact that Tencent is rising in capital is reassuring for the fundamentals ofUbisoft because it shows that the Chinese shareholder is confident in the group’s ability to raise the bar while maintaining the strategy of Guillemot“, notes on this point Valentin Mory.
“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 conference on Saturday “Ubisoft Forward” which will be an opportunity for the publisher to take stock of its licenses and releases.
Julien Marion – ©2022 BFM Bourse