France's Guillemot brothers have a target on their backs.
Over the last six months, Vivendi, led by corporate raider Vincent Bollore, has built separate stakes in the Guillemots' two video games companies, Ubisoft and Gameloft.
Last month, the media giant tendered to buy the remaining shares in mobile games maker Gameloft it doesn't already own. The offer values the maker of the Minions-themed Despicable Me game at 615 million euros ($685 million). Vivendi has a 15 percent stake in Ubisoft -- but hasn't disclosed its long term intentions for the creator of Assassin's Creed.
The two brothers, who hail from the northwest French region of Brittany, are handling the Vivendi threat very differently. Only one has a decent shot at keeping control of the companies they each founded.
Yves Guillemot, who heads the much larger and more profitable Ubisoft, has mounted a savvy defense, courting investors and hiring bankers to sound out partners and alternative buyers. Last month, he set out plans to increase sales by 60 percent and almost double its operating margin within three years. Investors seem receptive to his case that Ubisoft can thrive on its own and talent will flee in a hostile takeover; the shares rose 9 percent that day.
Elder brother Michel Guillemot, who runs Gameloft, has been more discreet: barely speaking in public beyond short and infrequent press releases, and appearing to bet that Vivendi wouldn't dare dislodge him. Gameloft hired bankers too, but was slower off the mark than Ubisoft in mounting a defense. The company took 11 days to publicly set out its opposition to Vivendi's tender offer. An investor day is planned for March 22.
While Yves has a fighting chance of warding off Bollore, he may be forced into bringing in a partner or even soliciting other bids if Vivendi were to make an actual offer for the whole company.
For Vivendi, Ubisoft is the more attractive target of the two. The company, the third-biggest independent games publisher after Activision Blizzard and Electronic Arts, is simply a larger, more profitable business than Gameloft. Ubisoft makes big-budget games for desktop computers and consoles and controls much of its own intellectual property. It's betting big on making movie versions of its best-selling games like Assassin's Creed due out in December.
Mobile games are a different animal, with lower budgets, lower prices, and faster release times. The best companies in the industry, King Digital (owner of hit game Candy Crush) and Supercell (maker of Clan Wars), earn billions from their hits and were snapped up by Activision and Softbank respectively.
Gameloft licenses much of its content so doesn't make as much money on those titles, among them Despicable Me, a Minions-themed game.
The Guillemots had tried to fend off Vivendi's stake-building, by increasing their own holding in Gameloft last year. By owning 29 percent of the company's voting rights, they thought they could neutralize Bollore's influence. But people close the family said Michel never believed Vivendi would make a bid for the whole company, and is now scrambling to react.
He's unlikely to get help from his brother, because a white knight bid for Gameloft from Ubisoft could risk its own independence. Given Gameloft's much lower margins of around 5 percent and its second-tier status in the $30 billion mobile gaming market, such a buyout would be a drag on Ubisoft's profitability. Several Ubisoft shareholders have told Yves in no uncertain terms that they would abandon him if the company bid for Gameloft.
Bollore, in classic corporate raider form, has gone after the easier prey in Gameloft, possibly in an effort to force the family to negotiate with him on the real prize of Ubisoft. So far Ubisoft and Gameloft have rebuffed Vivendi's requests to talk.
There is an apocryphal tale that the Guillemot brothers -- and there are five of them -- solve their problems at their mother's dinner table over the Breton staple of crepes. It may be time for some home cooking.
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