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Ubisoft sets out growth plan to fend off Vivendi

A Ubisoft Entertainment SA sign is displayed at the 2010 Game Developers Conference (GDC) in San Francisco, California, U.S., on Thursday, March 11, 2010. The market for portable and mobile video games is expected to grow to $11.7 billion by 2014 from $9.7 billion in 2009, according to researcher DFC Intelligence in San Diego. Photographer: Kim White/Bloomberg©Bloomberg

Ubisoft has presented plans to grow substantially over the next three years, as the French video game company attempts to fend off a potential takeover from Vincent Bolloré’s media group Vivendi.

The maker of Assassin’s Creed and Watch Dogs told investors on Thursday that it is targeting a 60 per cent increase in its revenues to €2.2bn by 2019. It also aims to triple its operating income over the three years as part of “a clear strategic road map that has already started to deliver”.

The news came as Vivendi launched a hostile takeover bid for Gameloft, a video-game company that, like Ubisoft, was founded by the Guillemot brothers.

Offering €6 per Gameloft share compared with its €5.48 closing price Thursday, Vivendi said that the proposed acquisition “fits perfectly with the group’s strategy to develop as a global leader in content and media”.

It added: “Video games constitute content in their own right and now represent a significant part of the entertainment and media industry”.

Gameloft, which has a market capitalisation of €468m, specialises in games for mobile platforms such as tablets and smartphones — a segment that Vivendi said was expected to record the fastest growth.

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Ubisoft, which normally provides targets for only a year ahead, published the medium-term plan in an attempt to win investor support for the company’s independence.

Chief executive Yves Guillemot, who founded Ubisoft 30 years ago with his brothers, fears that Vivendi plans to take “creeping control” of his company. Vivendi snapped up a stake in Ubisoft in October and has since increased its shareholding to almost 15 per cent.

Mr Bolloré, Vivendi’s chairman, has a reputation as a ruthless businessman and savvy investor. He is known for acquiring minority stakes in companies and then progressively taking control of their boards.

In addition to its stakebuilding in Ubisoft, Vivendi has muscled in on Telecom Italia in recent months, acquiring a 20 per cent stake to become its biggest shareholder. In December, the media group tightened its grip as it successfully pushed for four seats on Telecom Italia’s board.

Mr Guillemot is concerned Mr Bolloré may have similar designs for his video-gaming company. In its investor presentation in London on Thursday, Ubisoft said it planned to shift the company’s focus towards multiplayer games as well as franchises that would deliver predictable revenues. It told investors to expect strong free cash flows of about €300m.

“We want shareholders to have the right information about where we are going and how we will get there, and to understand how dangerous creeping control could be,” he said.

The Guillemot family own just 9 per cent of Ubisoft, leaving them vulnerable to a potential loss of influence over the company they founded.

Mr Guillemot argued that there were limited synergies between Ubisoft and Vivendi, which owns Canal Plus, the film and television business, and Universal Music, the world’s largest record company.

He said Vivendi “does not understand the industry” and that Ubisoft’s independence allows it to move quickly, take risks and work with the best commercial partners. Ubisoft has teamed up with 20th Century Fox for the distribution of a forthcoming Assassin’s Creed film.

With studios in almost 20 countries, Ubisoft reported €1.5bn of sales in its previous fiscal year. In the past four years its share price has quadrupled. However, the company cut full-year sales and profit guidance last week.

Mr Guillemot said investors could take confidence in its three-year targets because it is increasingly making games that have more predictable sales than those in the past. Profitability will also improve, he added, as digital sales have between $6 and $8 higher gross margins than physical sales.

Shares in Ubisoft closed up 11 per cent to €22.31.

Additional reporting by Adam Thomson in Paris

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