Ubisoft shares soar as bidding war looms

Shares in Ubisoft soared nearly 10 per cent this morning after a report that Vivendi Universal might help the French video games…

Shares in Ubisoft soared nearly 10 per cent this morning after a report that Vivendi Universal might help the French video games maker fight a possible takeover bid from US giant Electronic Arts.

French newspaper L'Agefi, citing a source close to the matter, said that Vivendi and Ubisoft had held  preliminary talks on the issue.

A merger between Vivendi Universal Games and Ubisoft would create the largest video games group in Europe, with sales of more than €1 billion, although it would still be dwarfed by Electronic Arts.

Analysts said the tie-up would be encouraged by the French government which would be concerned about seeing French games technology fall in foreign hands.

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"If the Vivendi scenario takes place then this could speed up things and force Electronic Arts to declare its intentions," said analyst Jean-Michel Salvador at Fideuram Wargny.

In early trading Ubisoft shares gained 9.27 per cent at €27.10, outperforming domestic rival Infogrames.

Some analysts now estimate that based on the French firm's current share price, Electronic Arts (EA) needs to offer at least €30 per share if it bids for Ubisoft.

Ubisoft shares have gained over 60 per cent since EA, the world's largest video games maker, bought almost 20 per cent of Ubisoft on December 20th. The purchase fuelled speculation that EA could soon launch a full bid for the company.

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

Ubisoft, which has said it considered EA's move hostile until it got more information from EA, is said to be already working on a defence.