EA Trying to Buy Ubisoft Shares

jujubees writes "What is going on with Electronic Arts these days? This morning it was revealed that EA is trying to acquire 19.9% of the Ubisoft shares owned by Dutch investment company Talpa Beheer B.V. If approved by the US Antitrust department, the buyout would instantly make EA the biggest shareholder, ahead of the Guillemot brothers. Whether this is a hostile takeover attempt is not clear at this point, no financial terms were disclosed." An anonymous reader also wrote in to mention a GamePro Editorial about the company, regarding its past as an honorable games-maker and its current reputation.

Comments

Sad Times

[ZephyrXero]

It is a very sad time for EA right now. I saw a "history of video games" type show on GSN a few months ago. On it, they had some of the original guys from Electronic Arts... they talked about how EA was formed to give developers more freedom, and to make better games. It was founded on the idea that one day video games could be considered an art form. Hearing that almost made me cry. EA is just about the worst comapany against all those things it once stood for. I'm glad to see people are finally realizing what EA's really like, even though I've been saying it (and boycotting) for years...

Its only 20% ownship, not 100%

[krbvroc1]

I'm not sure how approaching someone to purchase a 20% stake is considered by some as a hostile takeover.

As far as employment goes, if you recall previous stories, many developers left Ubisoft to work at EA. In fact, Ubisoft was one of the companies who sued the employees claiming they should not be allowed to work for a competitor in the game industry since they signed a non-compete clause.

In the bigger picture, this consolidation is inevitable and it sucks. With the recent article about the Game Industry overtaking Hollywood, those same business techniques will be used. Expect little innovation. They will do what they think will work without risk (ie; Halo 3, Far Cry 2, WOW 2, Doom 4, expansion packs). Just like the movie/television industry...find a hit with something, cookie cutter it, and sell it until everyone was sick of it a year ago.

Personally, I've never been a fan of EA games - partly because I don't care for the sports genre, but partly because EA's model seems to be; release the same game yearly with some tweaks. ie; 2001, 2002, 2003, 2004, 2005. It similar to the Intuit/Quicken model. Release to generate a steady revenue stream, not because of innovation.

Re:Its only 20% ownship, not 100%

[Dark Paladin]

It's the way stock ownership works - votes are based on percentages.

Take Ubisoft. With EA getting 20% of the stock, that means when the company takes votes on what to do, EA has 20% of the vote right there. Increase employee hours without overtime pay? EA has 20% of the vote, and so they only need to convince 30% of the total shareholders that they're right. (And usually, you can convince 1 out of 3 people that any stupid idea is right.)

They don't need 100% - just "enough".

20% is not enough to completely rule a company, but it's large enough to seriously influence decisions - which could be construed as a "takeover".

Re:Its only 20% ownship, not 100%

[Richard_at_work]

Basically, if the 20% EA purchases in Ubisoft is the largest single block of voting shares in the company held by one person or entity, then that person or entity can force AGM votes etc to go its own way, have people put on the board of directors and other things which having a controlling share brings. Also EA may be silently purchasing shares from private sellers on the stock market, which will further increase its controlling share.

Its possible to have a majority share in a company which is below 50%, but you run the risk of the rest of the shareholders banding together to vote against you, which is why a 51% share is considered better than a smaller share. You can still control a company with a 20% share, but the risk is there that you will loose that majority without actually doing anything.

For this to be considered a hostile takeover, EA has to be talking to and buying from third party shareholders directly, and not the company itself. If EA can gain a percentage share which is larger than that of the companies own, then the company has basically been taken over, without ever being approached. A standard takeover is where the company or the majority shareholder sells its stake to someone else.

Remember folks, once you put more than 50% of your shares out in the open, you no longer own the company.

Re:Its only 20% ownship, not 100%

[Tim C]

It depends on how many shares the Guillemots have though - if they have only one or two percent less, then they too only have to convince a little more than 1 in 3 people to back them.

Of course, if the Guillemots have much less - say only 5% or so - then it's a different matter.

Re:Its only 20% ownship, not 100%

[krbvroc1]

It depends on how many shares the Guillemots have though

According to their 2004 financial report, available on the ubisoft website, the Guillemots own around 14-15% of the company. 84-85% is owned by the public. This deal would appear to give EA more ownership than the Guillemots -- of course the financial details are not being disclosed yet. For all we know, it is the Guillemots who are selling to EA (along with some board members). There has been no comment by either company yet.

Re:Slashdot Financial Network

[nacturation]

Not only that, but Ubisoft brought it upon themselves. After all, if you give out shares it's in exchange for money. The shares are just another product which Ubi has sold to the highest bidder. Why should it matter now if EA wishes to purchase it from the current owner?

Re:Slashdot Financial Network

[EngineeringMarvel]

I'd also like to add that EA is not buying the majority of the stock, but merely would own the most stock. You cannot make company decisions with 20% of the companies stock. EA would require another 31% approval from the other stock holders to do any kind of real damage to Ubisoft.

In order for a hostile take-over to be possible, usually one entity requires atleast 50.01% of the companies stock. That is the only way they would have enough power to do whatever they want. With the most stock, however, EA would have the most power, but not THE power. Now stop panicking and over reacting...oh wait...I'm posting this on /., nevermind.

Re:Hostile

[pigscanfly.ca]

Well, if there going for 19.9% it strikes me as an investment rather than a acquisition. See accounting rules say that anything above 20% and you have to consider the other company a "subisduary" for accounting purposes. 19.9% strikes me as a deliberate attempt for them to avoid this implication.
Note: I am not an account, although I am reading slashdot when I should be studying for my AFM101 exam tommorow.