Vivendi Ups Takeover Bid for French Game Developer Gameloft, Faces Major Resistance

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Courtesy of Gameloft

PARIS — Vincent Bollore’s Vivendi is facing a wall of resistance as it attempts to gain control of Gameloft, the Paris-based mobile gaming company which is the sister-banner of “Assassin’s Creed” maker Ubisoft.

After acquiring 30.01% of Gameloft on February 18, Vivendi made an unsolicited offer of 6 Euros per share to take over the company. That offer, deemed “hostile” by Gameloft, was unanimously rejected by its board yesterday. Vivendi then upped its bid to 7.20 Euros per share, valuing Gameloft at around 610 million Euros.

Dominated by Yves Guillemot and his four brothers who founded the company in 1999, Gameloft’s board has until March 3rd to pronounce itself on the new Vivendi offer. Meanwhile, Vivendi has also just upped its stake in Ubisoft to 15.66% and is reportedly targeting to take over the vidgame powerhouse which has created franchises such as “Assassin’s Creed,” “Splinter Cell,” “Just Dance” and “Raving Rabbids.”

Yves Guillemot, who founded Ubisoft with his brothers in 1986 and now collectively own about 9% of the company, was just in Montreal and Toronto seeking potential investors for Ubisoft in order to prevent Vivendi’s hostile takeover. “We want to increase the number of Canadian shareholders in Ubisoft to have better control over the capital,” Guillemot told Canadian publication The Globe And Mail last week.

“Vivendi is using this back-and-forth with Gameloft to check out the strategy of the Guillemot brothers for Ubisoft; see what cards the brothers are holding, whether they will do a counter-offer and how much leverage they have to negotiate,” said Thomas Alzuyeta, financial analyst at Gilbert Dupont.

“The crux of the battle for Vivendi is to gain control of the board for both Ubisoft and Gameloft; Yves Guillemot is aiming to prevent that by attracting more investors or get the existing ones (for instance Blackrock for Ubisoft or Fidelity, Allianz Global Investors and Amber Capital for Gameloft) to increase their stake in order to get 50% of the voting rights covered,” added Alzuyeta. Currently the Guillemot only have 9% of Ubisoft with 16% of its voting rights and own 18.99% of Gameloft with 27.26% of its voting rights.

Reacting to Vivendi’s Feb. 18 bid, Gameloft’s board claimed the acquisition project by Vivendi “lacked an industrial rational,” and was financially insufficient. It also said “the terms of the acquisition by Vivendi (had) misled and let down minority shareholders who sold their shares to Vivendi.”

Gameloft’s board also argued Vivendi didn’t boast a single business unit which could bring synergies with Gameloft. “Vivendi’s revenues have been generated for the most part by its pay TV activity with Canal Plus and by its music biz with Universal Music,” stated the board.

The Guillemot brothers have also expressed their concern over the averse impact that Bollore’s hostile takeover would have on its staff and management. “They fear the arrival of Bollore would lead Ubisoft and Gameloft’s talent and creative execs to leave the company and go work for competitors — everyone is aware of the fact that Bollore purged Canal Plus Group’s management when he recently took control of Vivendi,” said Alzuyeta.

The news of Vivendi’s investment in Ubisoft and Gameloft initially raised eyebrows among analysts since Vivendi sold Activision-Blizzard for $8.2 billion less than three years ago but Alzuyeta says completing these two takeovers would be a smart move for Vivendi — mainly because it would allow Vivendi to gain control of the highly valuable Ubisoft IP’s and get Studiocanal and Dailymotion to work on them, as well as generate recurring revenues. For Ubisoft, however, the acquisition by Vivendi would not be so beneficial, according to the Paris-based analyst.

“Ubsoft is an international group for which the U.S. market is crucial, while Vivendi remains deeply grounded in Europe. The Vivendi acquisition would certainly obligate Ubisoft to work with Studiocanal for financing, distribution and international sales, rather than U.S. companies (such as Fox, New Regency, Warner and Columbia) and with Dailymotion rather than YouTube.

However, for the mobile gaming company Gameloft, Vivendi could play an interesting role due to its expertise in the advertising field, notably via Havas. “Vivendi and Havas know very well the international advertisers, and that would be a huge asset for Gameloft since its mobile games hold a tremendous potential in terms of advertising,” noted Alzuyeta. “Gameloft indeed reaches as many as 147 million people per month – or 19 million people per day — but it only generate 5 million Euros from advertising out of 252 million Euros in annual revenue,” per the analyst.

Vivendi’s bids for Ubisoft and Gameloft come less than six months after the appointment of Didier Lupfer, the former head of development and production at Ubisoft Motion Pictures, as vice president of Studiocanal, the film arm of Vivendi-owned Canal Plus Group. Ubisoft Motion Pictures is behind the movie adaptation of “Assassin’s Creed” directed by Justin Kurzel with Michael Fassbender and Marion Cotillard starring.

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  1. B Powers says:

    When will Vivendi make a real offer for this company? Long term shareholders have seen (and even paid) prices in the range of 8 to 9.5 euros per share. This company was in a slump prior to the recent Vivendi offer but clearly Vivendi bought shares last quarter on-the-cheap. Gameloft has built many of the top gaming apps over the years. Gameloft has developed a customer base that has ranked in the hundreds of millions. Gameloft has built up a worldwide staff of app engineers that build and customize apps for dozens of languages and systems. There is a lot of value in what Gameloft built and the market has under appreciated that value for years. The folks at Vivendi were very savvy to come in and buy up roughly 30% of the company while it was trading at lifetime lows, but I am certain that they are going to have to pay a premium to what it was worth prior to the 2014 – 2015 sell off. IMHO, if they want to buy this company they will need to make a 25% to 50% offer above what shareholders were paying in late 2013 / early 2014… That equates to an offer of 10 to 12 euros per share. For some here that seems like a lot, but when you look at the team of engineers that Gameloft has and compare it to the teams of engineers that Activision bought when they purchased King Digital then you’ll see that even at 12 euros per share a buyer would be getting one heck of a deal… I realize that King Digital has some assets that are earning far more than Gamelofts assets are, but Gameloft has an enormous library of underutilized assets. A company like Vivendi should be able to find a way to take advantage of those assets and squeeze a lot more profits out of them… Regarding the question of who is better for the company, the brothers or the folks at Vivendi, I can’t for the life of me figure out how the brothers let the share price fall from over 8 euros in early 2014 to below 3 last year. As a shareholder I welcomed the support that Vivendi added to the shares, but I won’t sell my shares for a fraction of what I believe they are worth… Last year when Tim Cook introduced the Apple TV to investors he said that “We believe the future of TV is apps”. Hmm, soon after that Vivendi started buying shares of Gameloft; a company that makes great apps but was trading at lifetime lows. By the way, Gameloft was one of the first companies to announce that it converted some of its games to run on the new Apple TV… Vivendi is making a bet on the future and they started buying shares while prices were low; that’s my definition of a savvy investor. They made an excellent investment in Gameloft but if they want to own the company they are going to have to make a real offer; until then, investors aren’t accepting it.

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