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Ubisoft (EPA: UBI) Boardroom Battle Gears Up

Adrian Ip
Posted Sep 24, 2016
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A couple of months ago, we reported on how the battle for control of Ubisoft (EPA: UBI) was getting underway with Vivendi (EPA: VIV) building up a stake in the company.

Read part 1 of the saga here.

Well, things are hotting up this week. Vivendi now currently owns about 23% of the French studio/publisher with approximately 20% of the voting rights, while on the other side of the battlefield the Guillemot family vehicle has about 13% of the company with almost 19% of the voting rights.

In other news set to dominate the firm’s agenda coming into its AGM on the 29th:

  • Ubisoft shares held despite a convertible bond issuance for €400m, with a 55% premium to the closing price.
  • If they get converted, dilution in the company would come out at approximately 6.5%.
  • The expectation is that this will give the firm a fighting fund to buy back more shares and fight an expected Vivendi eventual hostile takeover approach.
  • Ubisoft also arranged to buy back 3.63m shares in the company from France’s Banque Publique d’Investissement at €33.80/share.
  • Ubisoft has continued its charm offensive to investors, recently releasing details confirming that the Assassin’s Creed franchise has sold more than 100 million copies since its launch in 2007.

Ubisoft (EPA: UBI) Out with the old, in with the new?

The Guillemot brothers are clearly the “old guard” of Ubisoft. Founders, major shareholders (albeit with a smaller holding than Vivendi these days) and executives in the firm. That much said, the question is whether the same old formula is going stale.

Assassin’s Creed as a game franchise is taking a breather with the last major release getting mediocre reviews and the firm announcing they would take a break from the annual cycle for a while in order to refresh the formula, it’s still unknown if we’ll be getting a new instalment in 2017, although there is a movie coming out soon. “Yet another Ubi game” is a fairly common lament these days with the open world formula having been successful for the firm but feeling slightly done to death. Against this backdrop, we have the upcoming releases of Watch Dogs 2 (open world), Steep (open world) and the next South Park game (hooray, I can’t wait for that one!) among others. Expectations are for good sales, if not amazingly good games.

Aside from this, the company is branching out into other traditional media with movies and books.

Vivendi is of course now a major shareholder, the single largest in fact, with the Guillemot family in 2nd place. Behind the top two are Fidelity at 9.5%, BlackRock at 4.7% and NBIM at 2.5%. All professional investment vehicles who will of course be voting with where they see the best return for their money, not necessarily with where the best interests of gamers lie.

10+ years of highly mixed earnings quality from Ubisoft…

Vivendi will be pushing for representation on the board at the shareholders meeting and it could force a vote on the matter. It remains to be seen whether the last decade of mixed earnings quality is strong enough for other investors to hold the line with the family against a proven large scale media company with big ideas.

Keep it tuned here for coverage and analysis of the shareholder meeting next week.

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