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Does Ubisoft Fear a Hostile Takeover?

Does Ubisoft Fear a Hostile Takeover?

A few weeks ago, the Globe and Mail reported that a company originating in France, Vivendi, is attempting a hostile takeover of Ubisoft. Ubisoft has been flying into a panic, asking its shareholders to invest more and even requesting help from the Quebec government. I believe that Ubisoft is right to worry about this because of Vivendi’s record with almost every company it has bought and sold since 2004. Vivendi seems to be corporate version of a vampire.

Vivendi is attempting to obtain Ubisoft by means of a hostile takeover. A hostile takeover is essentially when one company decides it wants to own another company and forgets to ask nicely. Instead, the company, in this case Vivendi, will go directly to the victim’s shareholders and either buy their votes or buy the shares themselves. With this definition in mind, Vivendi has acquired 15% of Ubisoft’s shares, whereas the original owners of Ubisoft, the Guillemot brothers, have exactly the same amount. To heighten tensions further, Vivendi made an entirely unsolicited buying offer of about $750 million to Gameloft, also owned by the Guillemots. By doing so, Vivendi escalated the theoretical threat from Ezio watching Uncle Mario die, to backstabbing Leonardo da Vinci.

For those who have never heard of Vivendi, it is a multinational mass media company based in Paris, France. It has a hand in nearly every media industry, including music, television, film, video games, telecommunications, tickets, and video hosting serviced. In addition, Vivendi assisted in creating the first Pay-TV channel in France, Canal+, back in 1983. As further example of their dominance media, Vivendi created French telecom company Cegetel (now known as SFR) in 1996.

That being said, an economic depression did happen, and Vivendi claimed a loss of €23.3 billion in its 2002 annual report. To keep from claiming bankruptcy, Vivendi sold almost all of its subsidiaries to investors and other media companies. The most important of these sales, was in 2003 when Vivendi sold Canal+ to three foreign telecommunications companies, and MP3.com to CNET. Despite these major losses, Vivendi managed to buy 60% worth in shares of Cegetel, nearly buying the company back.

I mention these losses because I believe they are significant in analyzing just why Vivendi bought and sold Blizzard, and what they might be doing with Ubisoft now. Both are gaming companies, an industry Vivendi was only just beginning to dabble in before the economy collapsed. Vivendi’s core, as management apparently claimed, is the mobile communications firm, of which Vivendi is only holding 60%. Everything else Vivendi currently owns is in fragments across its subsidiaries.

Does Ubisoft Fear a Hostile Takeover?

As such, Vivendi is buying shares of other related companies and selling them, in order to raise money to be the large telecommunications company it was before. This is evident in nearly every company Vivendi has bought and sold since 2004. For example, Vivendi bought 52% of Activision Blizzard in 2007, and merged with the company. But it didn’t end there. According to Escapist Magazine , when Vivendi realized its share in Activision was going down instead of up, its first thought was to sell the entirety of Activision. The problem, however, was that no one was willing to buy. The solution was to force Activision to either buy itself back or allow Vivendi to take over completely and extract the cash it wanted, possibly ruining Activision in the process. Luckily, Activision was able to buy out Vivendi’s shares and keep the company safe from Vivendi’s fangs.

I believe Vivendi would do much the same with Ubisoft if it succeeds in its takeover. Indeed, Vivendi is probably using the controversy to drive the price of Ubisoft shares up. As Ubisoft grows increasingly desperate, going so far as requesting help from the Quebec government, this only serves to aid Vivendi’s goal. Vivendi dreams of being the largest telecommunications company in France, if not Europe, at the cost of any company it manages to sink its fangs into. Ubisoft is right to be afraid.

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