Ubisoft Courts Canadian Government, Investors To Defend Against Vivendi Takeover

Ubisoft is making moves to protect itself from Vivendi’s overtures at a hostile takeover. The company is reported to be courting Canadian investors and government funding to defend its independence.

Ubisoft CEO Yves Guillemot confirmed to The Globe & Mail that the company is meeting with nearly a dozen potential investors. The news comes alongside Canadian Prime Minister Justin Trudeau’s visit to Ubisoft Montreal, and the publisher's courting of both provincial and national financial support.

“The video game industry is a source of economic strength and elevates Canada’s place in the world. It was an opportunity for Prime Minister Trudeau to see the studio’s latest technological advances, as well as the video gaming innovations that have been developed here in Montreal," says Ubisoft vice president of human resources and communication Cedric Orvoine. "Mr. Trudeau and our CEOs discussed the importance of Ubisoft’s presence in Canada, and how the industry will be evolving over the next few years.”

The Assassin’s Creed publisher employs more than 3,000 across Canada in Montreal, Toronto, and other locations. Ubisoft is no doubt looking to leverage the visibility Trudeau’s visit brought as it seeks to shield itself from Vivendi, which has acquired a 15 percent control of Ubisoft since October.

When the former Activision owner began snapping up shares, Ubisoft was quick to call the action "unsolicited." This puts Vivendi’s move firmly in hostile takeover territory.

The difference between this type of acquisition and the more collegial variety we often see is in the execution. In a hostile takeover, the buyer doesn’t deal with company management. Instead, it acquires open shares and goes directly to existing shareholders in an attempt to buy them out.

With Vivendi in control of 15 percent, it has the muscle to attempt changes on the board of directors. Doing so would give the company a foothold on the inside from which to further increase its control.

Guillemot told The Globe and Mail that his family's 16 percent control is supported by investor groups Blackrock and Fidelity, which together own about 15 percent. The company needs a majority to stave off Vivendi attempts to make governance changes.

Vivendi is also currently making moves to take over Gameloft, also owned by members of the Guillemot family. It is doing so with enormous cash reserves in part from Activision’s buyout that saved the Call of Duty publisher from being bled dry.

Acquiring new investment would further diversify Ubisoft’s ownership, lessening Vivendi’s grip. The Canadian government has reason to take an interest in order to protect the thousands of jobs that Ubisoft wouldn't be unable to guarantee under new ownership.

Ubisoft fell short of targets for the holiday quarter. The company is leaning on strong sales of Far Cry Primal and The Division to lift its earnings for the final three months of the year.

The coming fiscal year brings a new Watch Dogs title, For Honor, Ghost Recon: Wildlands, South Park: The Fractured But Whole and a new franchise.

[Source: The Globe and Mail]

Our Take
With the relative dip in Assassin’s Creed sales in the current fiscal year and an announced year off from the series in 2016, Ubisoft is taking the long view on one of its most valuable franchises. However, that may leave the company with softer performance in the 2016-17 fiscal year.

Should The Division live up to expectations and garner the same enthusiasm as Destiny, a game to which it has been compared, a year away from Assassin’s Creed might not have as deep an impact. The coming 12 months are going to be crucial for Ubisoft’s independence, and its titles need to be home runs. Should sales (and share price) dip, the publisher becomes an easier target for hostile takeover.