Ubisoft Fight Back Against Vivendi by Buying up to 4 Million Shares
For a while now we've been covering the conflict between Ubisoft (EPA:UBI) and Vivendi (EPA:VIV). There's a definite impression that Vivendi are interested in acquiring Ubisoft. Despite claims by Vivendi that they haven't decided whether to place a bid for the company, or sell stock, Ubisoft have not been idle in their defense, with a recent repurchase of 4 million shares in the works.
Recently Ubisoft have been vying with Vivendi in the boardroom. We've recently covered the fact that Vivendi have been abstaining from any votes, including a recent vote which resulted in the failure of a compensation plan that would give shares to employees of the company. This also mimics last year, where the abstention of Vivendi also led to the same result.
This has been used to reinforce claims that Ubisoft under Vivendi would be a bad thing for all involved, using the argument that a media conglomerate like Vivendi can't think long-term. The argument was that 'Extraordinary Resolution 31', which would allow Ubisoft to give free shares to employees, would be essential in attracting and retaining industry talent.
Ubisoft are Making Moves
The new move that was announced a few days back is a repurchase of 4 million shares. The announcement has revealed that Ubisoft have mandated an investment services provider to handle this buyback. As a result of encouraging performances, Ubisoft shareholders have been backing Yves Guillemot and his strategy. This buyback has already begun and should conclude by the 29th of December.
Shares purchased in this way will then be retired. This means that these shares simply can't be purchased by anybody, Vivendi or otherwise. Vivendi currently hold around 27% of Ubisoft shares, offering roughly 24% voting rights. This is considerably larger than the Guillemot family, who have an estimated 14% of shares with 20% of voting rights. Should Vivendi reach 30%, they will be forced under French law to either make an offer for Ubisoft or sell shares to drop below the threshold.
Also in France there is something called the Florange law. Essentially this law gives double voting rights to any shares held over two years. Vivendi first bought 6.2% of Ubisoft in mid-October 2015, raising that to 10% later in the year. We don't know exactly how much of Vivendi's holding is coming to the 2 year threshold given possible holding churn, but it's fair to say that they are soon to be there or thereabouts.
Planning for the Future
This makes the recent share buyback interesting in another way. Share price will inevitably increase, as it has by €3.14, or 5.24% since the announcement of the buyback. This could make any bid for the company a costly venture. Should Vivendi want to avoid triggering a bid they have options. Shares can be sold to avoid hitting the threshold the option of selling shares prior to hitting the 30% threshold. In an interview following Vivendi's recent AGM, COO Stephane Roussel stated that the company hasn't decided whether to sell the stock or make a bid for the company.
As we covered in Ubisoft's financial year report, the company is doing well. Expansion into the Chinese market should bring greater growth. In addition to this the return of franchises like Assassin's Creed and Far Cry. This will undoubtedly boost core games sales for the current financial year. While Ubisoft have been inconsistent in the past, the current upward trend of the company looks to continue.
While this is the case, it's hard to believe that other investors would want to see the Guillemot family lose control. We'll continue to follow the saga as it moves onto its next stage, whatever that may be.
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