Ubi's future on line as EA won't rule out acquisition

Speculation continues to mount over the future of French publisher Ubisoft, after market leader Electronic Arts this week declined to rule out the possibility of taking a controlling stake in the firm following its 20 per cent share purchase in December.

Earlier this week, the Wall Street Journal reported that executives from the two companies are engaged in preliminary talks, which was confirmed by EA's VP of corporate communications Jeff Brown.

Brown downplayed the importance of the talks - telling US website GameSpot that "it would be unwise to characterise any of the discussions as a negotiation" and essentially claiming that they didn't go beyond the normal conversations that would be expected between a company's management and its largest shareholder.

Other signals from both companies, however, tend to suggest that more is afoot - particularly comments made by EA's CFO Warren Jenson at a conference in New York last night, helpfully transcribed by Gamespot, where he said that EA is "wide open... to acquisitions" and that they "will continue to be a part of our growth story."

Speaking specifically about the Ubisoft situation, Jenson said that "there was a block of shares that was on the market... we thought it was important that we own them, and so we negotiated and were successful in reaching an agreement to acquire roughly 19, 20 per cent of Ubisoft."

"From there, it's about keeping all our options open," he continued. "And that's about as far as I will go."

Since acquiring the stake in Ubisoft in December, EA has been careful not to close down any of those options, repeatedly reiterating that it may add to its holding in the firm and seek representation on the board.

The company has been careful, however, to avoid any movement that could be seen as hostile, especially after Ubisoft itself characterised the original share acquisition as a hostile move - and a nervous mood continues to prevail within the French company, according to internal sources, with rumours that EA plans to "go hostile" spreading on more than one occasion.

According to the Wall Street Journal, if EA does decide to buy out Ubisoft, the asking price is likely to be in the region of 40 Euros per share - more than twice the amount paid for the company's original investment in the firm two months ago, and representing a valuation of around a billion Euro ($1.3 billion), but still well within EA's reach.

However, other options remain on the table for Ubisoft - including the possibility of a merger with subsidiary GameLoft, which would increase the shareholding of the Guillemot family, financial assistance from the French government to help the firm to remain independent, and even a rumoured approach to the Walt Disney Company to help the firm to stay out of EA's hands.

Ironically, it's that final option which could actually drive EA to begin snapping up Ubisoft stock in a hostile fashion. Some within the industry believe that the company's acquisition of Ubisoft stock was made not merely as an investment, but also to prevent the large block of shares from falling into the hands of a large media company - such as the Disney company, or Rupert Murdoch's News Corporation.

News Corp has in recent months publicly stated an interest in acquiring a major company in the games industry; keeping one of its fastest-growing competitors out of the hands of a giant media conglomerate is an obviously attractive option for Electronic Arts, and not particularly far fetched as corporate conspiracy theories go.