Ubisoft, EA hold preliminary talks

Ubisoft and U.S. giant Electronic Arts are holding talks two months after Ubisoft dismissed EA's acquisition of a near-20 percent stake in the French video game maker as "hostile," the Wall Street Journal said on Wednesday.

The talks are still preliminary and running parallel with other approaches that family-run Ubisoft is making to broker solutions that might shake off a bid from EA but they could be the beginning of an eventual agreement between the two, the paper said, citing people familiar with the situation.

Ubisoft declined to comment.

Ubisoft shares have soared 95 percent since EA bought a 19.77 percent stake in Ubisoft on Dec. 20, sparking speculation it could launch a full bid for the firm.

EA, the world's largest video game maker, earlier this month reiterated it might add to its stake in Ubisoft and seek representation on its board.

Ubisoft has vowed to stay independent and has dismissed EA's approach as hostile until it received more information.

Tentative talks between both companies are on the takeover price EA might be willing to pay and how Ubisoft's management might be reshaped, the Wall Street Journal said.

Ubisoft's management said last month that a study by its adviser and shareholder Calyon, the investment bank of Credit Agricole, put a valuation of 33-35 euros per share on Ubisoft based on the value of its studios and brands.

But, adding up the value of the distribution network and a stake in French video games firm Gameloft, the price tag could near 40 euros, some analysts say. That would be double the 19.69 euros a share EA paid for its stake in Ubisoft.

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EA, Ubisoft's largest shareholder which also has 20.88 percent of its voting rights, has said it is acting alone and might sell or buy more Ubisoft shares, including a controlling stake.

The Guillemot brothers, Ubisoft's founders, jointly own 17.5 percent and have 22.8 percent of the voting rights.

Caisse des Depots et Consignations, a state-owned French financial institution, holds about 6 percent of Ubisoft's capital. BNP Paribas has a stake of some 4 percent and Calyon a little over 5 percent.

Ubisoft is an attractive target, analysts said, given a free float of nearly 70 percent, 2003/04 fiscal year sales of 508 million euros ($659.2 million) split between Europe and North America, and a portfolio of more than 1,000 titles including a variety of Tom Clancy hit franchises like "Splinter Cell."

With cash of $2.5 billion, EA could also easily afford Ubisoft, which has a market value of about 559 million euros.