A recent report in The Wall Street Journal states that Electronic Arts and Ubisoft have already had initial talks about a possible buyout of the Paris-based publisher. Although neither company could comment on the WSJ report, there could be a number of obstacles that would make it difficult for EA to acquire Ubi’s outstanding shares. Apparently Ubisoft just wants a friendly outcome, and it doesn’t necessarily have to be with EA.

When Electronic Arts announced back on December 20 that it had acquired 19.9 percent of French publisher Ubisoft, making EA the largest shareholder and giving the company 20.88 percent of the voting rights, it sent shockwaves through the industry and immediately fueled speculation that a full buyout of Europe’s third-biggest independent publisher was imminent.

Initial Talks

Now, according to a report in The Wall Street Journal, both sides have begun talking. Citing people familiar with the situation, the WSJ says, “For the moment, the talks are preliminary and running in parallel with other approaches that family-run Ubisoft is making to broker solutions that might shake off the bid from EA… but they could be the starting point of an eventual deal between the two.”

Apparently, these early exchanges between Ubisoft and EA have involved discussions on how much EA might be willing to pay to take over Ubisoft, and how EA plans to rearrange management at the publisher. When contacted by GameDAILY BIZ, neither EA nor Ubisoft was willing to divulge any further information. However, Ubisoft’s management has recently suggested that it would value the company at up to 40 euros per share ($1.3 billion). This could prove to be a sticking point for EA, since the figure (per share) is significantly higher than the current price of 32 euros and it’s more than double the price EA paid for the nearly 20% stake it purchased from billionaire Dutch TV executive John de Mol.

Ubi’s reluctance

Another hurdle EA may have to overcome is Ubisoft’s resistance. Shortly after EA made its initial announcement of the acquisition last year, Ubisoft Chairman Yves Guillemot called the move “hostile” stake building and he vowed to keep his company independent. Many scenarios have emerged as possibilities for the publisher, including assistance from the French government or the possibility of merging with another company. Vivendi Universal Games and Infogrames were both mentioned as potential “white knights” but neither company is truly in the right financial state to help. Another rumored strategy was that Ubisoft would merge with mobile games developer Gameloft, which it already owns 29% of. A merger between the two companies would increase the proportion of the Ubisoft founders’ control in the company and might be enough to fend off an EA buyout. Currently, the Guillemot family has a 17.5% stake in Ubisoft and 26% of the voting rights.

“Ubisoft continues to explore multiple options and has not chosen any specific course of action at this time. The company’s management continues to pursue different avenues that will strengthen Ubisoft’s position in the marketplace,” a Ubisoft representative told GameDAILY BIZ.

For its part, EA has insisted that its actions were not hostile, and that they even contacted Ubisoft prior to the 19.9% purchase. “There wasn’t the least bit hostility between us… In our industry, one doesn’t make hostile moves because our value lies with people,” Electronic Arts Europe chief Gerhard Florin told La Tribune last month. More recently during a conference call to discuss Q3 results, EA’s Chief Financial and Administrative Officer Warren Jenson tried to smooth things over. “If anything happens, we expect it to be with the entire cooperation of Ubisoft,” he said.

Looking for a friendly outcome

There is one clear upside to all of this for Ubisoft, though. It has raised awareness of how valuable the publisher has become in the industry, says Guillemot. “We (Ubisoft) have been able to discuss with them (EA) but are not sure what they will do precisely. What they have done (by buying the stake in Ubisoft), is they have created something new for us — telling everybody that Ubisoft is a company that has assets and brands and now we are speaking with lots of people on the entertainment and videogame and financial industries,” Guillemot explained during a recent earnings call. In fact, since EA’s purchase Ubisoft shares have soared 95%.

What the future holds for Ubisoft is not certain. One person familiar with Ubisoft executives’ thinking told the WSJ, “This is a company that has had a certain amount of success. What they want is a friendly outcome, not necessarily with EA, but a friendly deal.” That being said, EA’s 20% stake in the French publisher could dissuade other investors.

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