[Discussion] Tencent's Potential Takeover Bid: A Turning Point for Ubisoft Amidst Financial Struggles

[Uncrowned Guard]

Tencent Aims To Save Ubisoft By Taking Private

The latest development in a tumultuous year for Ubisoft is the prospect of going private under Tencent. Information suggests that the Chinese tech giant, Tencent, is in active discussions to take over primarily. The negotiations, reportedly between Tencent Holdings Ltd. and Guillemot Brothers Ltd., Ubisoft's owners, highlight a shared objective to stabilize Ubisoft amidst its financial hardship.

A Turbulent Year For Ubisoft: Push for Change

2019 has been a whirlwind year for the French company, which stumbled under the weight of unimpressive sales from highly-awaited games like Star Wars Outlaws. Further intensifying the company's turbulence was the sizeable drop in share value, precipitously falling by a significant 40% to a record low after a coup attempt by AJ Investments.

Tencent's association with Ubisoft isn't recent. The Chinese company scooped up a substantial 49.9% stake in Guillemot Brothers Ltd., the holding company of Ubisoft in 2022. The most recent financial disclosure puts Tencent's stake at 9.2% net voting rights, which is significantly below the Guillemot brothers' 20.5% stake. However, Tencent's official response remains elusive due to the ongoing National Day of the People’s Republic of China, which involves a weeklong holiday.

Market Reaction And Ubisoft's Road to Chaos

Despite the internal turmoil, the French market response to the Tencent news was nothing short of overwhelming, propelling the Ubisoft stock by a noteworthy 33% on the day following the announcement. Strikingly, the Guillemot family, which owns Ubisoft, has yet to publicize their stance on the situation.

Ubisoft's present cluster of troubles started early this year, as the company anticipated the successful launch of games like Star Wars Outlaws and Assassin's Creed Shadows. The first setback for Ubisoft materialized when XDefiant, the arena shooter game, failed to captivate users after a promising launch in May. August heightened the concerns as Star Wars: Outlaws failed to perform as expected, both critically and financially. This disappointment sent the stock spiraling to a ten-year low and provoked calls from a Slovakian hedge fund for a company sale by the Guillemot family.

The recent letdown in the Ubisoft saga involves the unexpected delay of Assassin’s Creed Shadows’ release. Initially scheduled to premiere in November, the game's delay to 2025 was announced after an abrupt pull-out from the Tokyo Game Show and suspending press previews.

This year thus continues the trend of Ubisoft’s difficulty in scoring a distinct success, as both pressure from lackluster releases and prolonged crunch time continue to beleaguer the French gaming behemoth.

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