Finance Link News October 6th (Editor Zhao Hao) - According to media reports, insiders revealed that Tencent Holdings and the Guillemot family are considering a joint acquisition and privatization of the French gaming company Ubisoft Entertainment.

Ubisoft is a game production, distribution, and sales company based in France, founded by the Guillemot family. Ubisoft's "Assassin's Creed" series is one of the representatives of global AAA games, with other works including "Rayman", "Prince of Persia", etc.

Insiders stated that Tencent and Guillemot Brothers Ltd. have been in discussions with advisors, seeking ways to stabilize Ubisoft and increase its value, with one option being to jointly privatize Ubisoft.

Insiders added that this option is still in its early stages, and it is uncertain whether the deal will ultimately materialize. In addition, Tencent and the Guillemot family are also considering other alternative solutions.

Due to this news, Ubisoft listed in France closed up 33.52% on Friday, marking its largest single-day increase since its IPO in 1996. However, the stock has fallen by about 40% since the beginning of the year, with the company's latest total market cap at $2.03 billion.

Compared to this, Ubisoft's American peer Electronic Arts Inc has a market cap of $37.7 billion, Take 2 Interactive at $26.58 billion. "PlayerUnknown's Battlegrounds" developer Krafton is valued at $11.31 billion, more than five times that of Ubisoft.

Ubisoft's stock price trends reflect investors' bleak expectations for the game product line and financial prospects. Earlier, Ubisoft lowered its guidance for this fiscal year, expecting net bookings for the second quarter to be between 0.35 billion and 0.37 billion euros, lower than the previously expected 0.5 billion euros.

Last week, Ubisoft delayed the release date of "Assassin's Creed: Shadows" originally scheduled for November, stating, "Although this game is already feature-complete, the lessons learned from the release of 'Star Wars: Outlaws' have given us more time to further polish this game."

These factors have led to Ubisoft's stock price dropping to its lowest point in nearly a decade. During the downturn, aggressive investors such as AJ Investments have been pushing for company transformation, proposing either privatizing Ubisoft or selling it to strategic investors like Tencent.

Previously, AJ Investments stated in an open letter that the private equity firm had hired "industry experts" as potential replacements for Ubisoft's management to implement a strategy to turn Ubisoft's losses into profits.

According to Ubisoft's annual report, as of March 31, 2024, Tencent holds 9.986% of Ubisoft's shares, with 9.185% of net voting rights, while the members of the Guillemot family collectively hold 15.438% of shares and 20.455% of voting rights.

In addition to the delay of "Assassin's Creed," Ubisoft also has to deal with the overall downturn in the gaming industry. Research firm Newzoo forecasts that the global gaming market is expected to grow by only 2.1% in 2024, far below the rapid growth levels seen in the early stages of the COVID-19 pandemic in 2020 and 2021.

James Lockyer, a technology research analyst at the British investment bank Peel Hunt, told the media that one of the challenges facing game publishers today is that gamers spend more time on older games than on new ones.

Lockyer also pointed out that with more choices and reduced cost of living, consumers' cash flow is tighter, leading to lower-than-expected revenue and return on investment for game developers.