(Bloomberg) — Tencent Holdings Ltd. and Ubisoft Entertainment SA’s founding Guillemot family are considering options including a possible takeover of the French video game developer after it lost more than half of its market value this year, according to people familiar with the matter.
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The Chinese technology company and Guillemot Brothers Ltd. have spoken to advisers to help explore ways to stabilize Ubisoft and increase its value, the people said. They asked not to be identified discussing a private matter. According to the people, one of the options being discussed would be to work together to take the company private.
Ubisoft shares rose as much as 33% in Paris on Friday after the Bloomberg News report, the strongest gain since the company’s 1996 initial public offering.
Ubisoft shares are down about 40% this year, giving the company a market capitalization of about €1.8 billion ($2 billion). Tencent owned 9.2% of Ubisoft’s net voting rights at the end of April, while the Guillemot family held about 20.5%, according to the company’s latest annual report.
Some minority shareholders, including AJ Investments, have been pushing for a takeover or sale of Ubisoft to a strategic investor amid the slump in share prices. The considerations are at an early stage and there is no assurance that they will lead to a transaction. Tencent and the Guillemot family are also considering other alternatives, according to the population.
Spokespeople for Ubisoft and the Guillemot family declined to comment. A Tencent representative could not immediately comment during a week’s holiday in China.
Last month, Ubisoft shares fell to their lowest in more than a decade after the company lowered its outlook for weaker-than-expected sales and a delay to the highly anticipated Assassin’s Creed Shadows title. The video game company has struggled in recent years to recover from a pandemic-era production crisis that resulted in delays in the release of new games and canceled titles.
Several private equity firms, including Blackstone Inc. and KKR & Co., were studying potential bids for Ubisoft in 2022 amid a wave of major deals in the video game industry, Bloomberg News reported at the time. Later that year, the founding family partnered with Tencent, which bought 49.9% of the Guillemot Brothers holding, in addition to the direct stake it had in Ubisoft.
The deal was seen by analysts as a way to keep suitors at bay, allowing the brothers to retain control of Ubisoft’s board, with Tencent’s stake limited to less than 10% with no operational veto power. Under the deal, Tencent also could not sell its shares in Ubisoft for five years, after which the Guillemot family will have the right of first refusal. The pact still allows the brothers to talk and work with whoever they want, Ubisoft Chairman and Chief Executive Officer Yves Guillemot said in an interview last year.
(Updates with shares in third paragraph.)
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