Ubisoft and Vivendi Saga Closes – The Curtain Call

This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.

For quite a while, we have been covering what turned out to be a protracted game of tug of war between Ubisoft (EPA:UBI) and Vivendi (EPA:VIV). Ubisoft have had reasonable fears of a hostile takeover by Vivendi. A collective sigh of relief can now be heard as the battle for the company has been finalised.

Ubisoft and Vivendi: Breaking Down the Deal

Ubisoft have announced that a deal has been made for Vivendi to sell its entire 27.3% stake in Ubisoft. Due to the sheer quantity of Vivendi's shares in Ubisoft, this hasn't been a simple transaction. Vivendi owned 30,489,300 shares in the company and these have been bought at a price of €66 per share. This gives the transaction a value of €2.2 billion. This is over double the price that Vivendi paid for the shares. Vivendi have also committed to not buy any shares in Ubisoft for at least five years.

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As a part of this transaction, 8.1% of shares have been purchased by Ubisoft in a buy-back taking place over the coming three years, using Crédit Agricole Corporate and Investment Bank (CACIB) as an intermediary. The Guillemot brothers have also increased their number of shares by 2.7% using the same scheme. Further 8% is to be made available for €66 per share to institutional investors. Based on interest, a further 1.3% could be made available, being removed from the amount Ubisoft are buying back.

While these aspects are not too unsurprising, the interesting element are two new long-term investors in the company. These are the Ontario Teachers' Pension Plan and Tencent (HKG:0700). The Ontario Teachers' Pension Plan has committed to acquire 3.4% with Tencent acquiring 5%. Neither companies will gain representation on the board of directors.

Strategy and Growth

CEO, and co-founder, Yves Guillemot had this to say on the deal:

“The evolution in our shareholding is great news for Ubisoft. It was made possible thanks to the outstanding execution of our strategy and the decisive support of Ubisoft talents, players and shareholders. I would like to warmly thank them all. The investment from new long-term shareholders in Ubisoft demonstrates their trust in our future value creation potential, and Ubisoft’s share buy-back will be accretive to all shareholders".

In addition to finally removing the looming threat of Vivendi, this deal has proven valuable in another way. Ubisoft and Tencent have signed a partnership designed to significantly accelerate the reach of Ubisoft titles in China over the coming years. This matches the partnership Tencent recently made with Paradox Interactive (EPA:ETA), owning 5% and helping to promote and push their titles in China, a largely untapped market for non-mobile video games.

This was said on the partnership: "Finally, the new strategic partnership agreement we signed will enable Ubisoft to accelerate its development in China in the coming years and fully leverage a market with great potential”.

Tencent has followed a trend of largely not attempting to exhort control over those it invests in, allowing them to run as they always have. In its forays into the conventional gaming industry Tencent has acquired League of Legends developers Riot outright. The company also owns minority stakes in Activision Blizzard (NASDAQ:ATVI), Epic Games, Paradox Interactive.

Ubisoft shares rose from €67.72 to €68.72, or 0.62%, upon news of the deal.

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