HONG KONG: Tencent Holdings Ltd<\/a> plans to raise its stake in French video game group Ubisoft Entertainment<\/a> SA as the Chinese gaming<\/a> giant pivots to the global gaming<\/a> market, four sources with direct knowledge of the matter told Reuters.
China's largest social network and gaming firm, which bought a 5% stake in Ubisoft<\/a> in 2018, has reached out to the French firm's founding Guillemot<\/a> family and expressed interest in increasing its stake in the firm, the sources said.
It is not clear how much more Tencent<\/a> wants to own in Ubisoft<\/a>, valued at $5.3 billion, but Tencent<\/a> aims to become the single largest shareholder of the French company with an additional stake purchase, two of the sources said, speaking on condition of anonymity.
Tencent is hoping to buy a part of the additional stake in Ubisoft, the maker of the blockbuster \"Assassin's Creed\" video game franchise, from the Guillemot<\/a> family, which owns 15% of the firm, three of the sources said.
Tencent could offer up to 100 euros ($101.84) per share to acquire the additional stake, two of the sources with knowledge of the internal discussions, said. It paid 66 euros per share for the 5% stake in 2018.
Details of the deal are not yet finalised and are subject to change, the sources said.
Ubisoft shares surged 21% after the Reuters report at 1008 GMT and were set for their biggest daily rise since 2004.
Shares in Guillemot Corp SA, the holding company in which the Guillemot family owns the majority shareholding, were trading up 10.3% at 1240 GMT and were set for their biggest daily jump since January.
Tencent will also seek to acquire shares from public shareholders of Ubisoft, two of the sources said, in a bid to boost its ownership and become the single-largest shareholder.
About 80% of the French firm's shares are owned by public shareholders, according to its latest annual report.
All the sources declined to be named as they are not authorised to speak to the media.
Tencent and Ubisoft declined to comment.
Representatives of the Guillemot family could not be immediately reached for comment.
The planned stake purchase, Tencent's latest major foreign deal since a regulatory crackdown in late 2020, will help it offset some of the pressures in the domestic gaming market. China's video games market, the world's largest, has become fiercely competitive.
\"Tencent is very determined to nail down the deal as Ubisoft is such an important strategic asset for Tencent,\" one of the people said.
At the top end of 100 euros per share, Tencent's offer will be a premium of 127% to the stock's 44 euros average price over the past three months, and is close to its historical price ceiling at 108 euros in 2018.
Tencent has submitted to the Guillemot family a term sheet - a non-binding offer describing the basic terms and conditions of an investment - with a price \"way above\" the company's current price to ward off potential competition, one of the sources said.
The aggressive offer comes as global gaming power houses have been rushing to snap up quality independent game makers in recent years, which are in scarcity, two of the sources said.
Tencent's senior executives flew to France in May to meet the Guillemot family about the purchase, two of the people said.
DOMESTIC PRESSURES<\/strong>
China's gaming regulator has not granted any new game licences to Tencent at home since June last year, before it froze gaming approvals for nearly nine months. Since it resumed approvals in April this year, none of the past four batches included the company.
In May, Tencent reported that its domestic game revenue dropped 1% in the first quarter while international game revenue rose 4%.
Tencent, which has stakes in U.S. video game developers Epic Games<\/a> and Riot Games, said in June it would release its flagship mobile game \"Honor of Kings\" globally by the end of the year.
In 2016, it bought a majority stake in \"Clash of Clans\" mobile game maker Supercell for roughly $8.6 billion, one of the world's biggest ever gaming deals.
It also owns 9% of UK video gaming firm Frontier Developments and said last year it would buy another British developer Sumo<\/a> in a $1.3 billion deal.
Ubisoft, whose titles also include \"Prince of Persia\" and \"Rainbow Six\", in May forecast lower operating profit for 2022-23 after the company reported operating income for 2021-22 that missed estimates.
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