This undated photo shows Chinese internet giant Tencent Holdings Ltd's logo. (PHOTO / IC)
HONG KONG - Tencent Holdings Ltd plans to raise its stake in French video game group Ubisoft Entertainment SA as the Chinese gaming giant pivots to the global gaming market, four sources with direct knowledge of the matter told Reuters.
China's largest social network and gaming firm, which bought a 5 percent stake in Ubisoft in 2018, has reached out to the French firm's founding Guillemot family and expressed interest in increasing its stake in the firm, the sources said.
Tencent is hoping to buy a part of the additional stake in Ubisoft, the maker of the blockbuster "Assassin's Creed" video game franchise, from the Guillemot family, which owns 15 percent of the firm, three of the sources said
It is not clear how much more Tencent wants to own in Ubisoft, valued at $5.3 billion, but Tencent aims to become the single largest shareholder of the French company with an additional stake purchase, two of the sources said, speaking on condition of anonymity.
Tencent is hoping to buy a part of the additional stake in Ubisoft, the maker of the blockbuster "Assassin's Creed" video game franchise, from the Guillemot family, which owns 15 percent of the firm, 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 with knowledge of the internal discussions. It paid 66 euros per share for the 5 percent stake in 2018.
Details of the deal are not yet finalized and are subject to change, the sources said.
Gaming fans play Ubisoft games at the 2019 Electronic Entertainment Expo, also known as E3, in Los Angeles, California on June 11, 2019. (FREDERIC J. BROWN / AFP)
Ubisoft shares closed up 11 percent on Thursday, after having risen as much as 21 percent earlier after the Reuters report in their biggest daily rise since 2004.
Shares in Guillemot Corp SA, the holding company in which the Guillemot family owns the majority shareholding, ended 7.3 percent higher.
Tencent will also seek to acquire shares from public shareholders of Ubisoft, two of the sources said, in a bid to boost its ownership and become the single-largest shareholder.
About 80 percent of the French firm's shares are owned by public shareholders, according to its latest annual report.
At the top end of 100 euros per share, Tencent's offer will be a premium of 127 percent to the stock's 44 euros average price over the past three months, and is close to its historical price ceiling at 108 euros in 2018
All the sources declined to be named as they are not authorized to speak to the media.
Tencent and Ubisoft declined to comment.
Representatives of the Guillemot family could not be immediately reached for comment.
"Tencent is very determined to nail down the deal as Ubisoft is such an important strategic asset for Tencent," one of the people said.
At the top end of 100 euros per share, Tencent's offer will be a premium of 127 percent to the stock's 44 euros average price over the past three months, and is close to its historical price ceiling at 108 euros in 2018.
Tencent has submitted to the Guillemot family a term sheet - a non-binding offer describing the basic terms and conditions of an investment - with a price "way above" the company's current price to ward off potential competition, one of the sources said.
The aggressive offer comes as global gaming power houses have been rushing to snap up quality independent game makers in recent years, which are in scarcity, two of the sources said.
Tencent's senior executives flew to France in May to meet the Guillemot family about the purchase, two of the people said.
In May, Tencent reported that its domestic game revenue dropped 1 percent in the first quarter while international game revenue rose 4 percent.
Tencent, which has stakes in US video game developers Epic Games and Riot Games, said in June it would release its flagship mobile game "Honor of Kings" globally by the end of the year.
In 2016, it bought a majority stake in "Clash of Clans" mobile game maker Supercell for roughly $8.6 billion, one of the world's biggest ever gaming deals.
It also owns 9 percent of UK video gaming firm Frontier Developments and said last year it would buy another 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 operating income for 2021-22 that missed estimates.
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