All eyes on 29 September AGM and Vivendi’s hidden agenda
The Guillemot brothers (13.2% of capital, 19.2% of voting rights) will likely face off with Vivendi
(22.6% and 20.6% respectively) for the first time in public at this week’s AGM. The former wish to
keep Ubisoft independent while the latter has not submitted any resolutions despite making clear
that it wants Board representation; Vivendi will likely do so only at the AGM, for reasons unclear to
us (attempt to reduce opposition, wait-and-see attitude, wish for a gentlemen’s agreement?).
A creeping takeover by Vivendi: the worst case but still an unlikely scenario
A creeping takeover by Vivendi is clearly the worst case for our call on Ubisoft but this looks
unlikely (10% probability in our view vs 70% for Vivendi failing to enter the Board). We think that
Ubisoft investors are unlikely to back Vivendi given the potential conflict of interest and Mr Bollore’s
proven track record in creeping takeovers (think Havas, Vivendi, TI). As such, we continue to
believe Vivendi, which seems to have big ambitions in video games, will have to launch a takeover
bid at an attractive valuation (EUR45-50) to gain control of Ubisoft, as it did with Gameloft.
FY16/17 shaping up to be another strong year
After the AGM, investors will likely shift their focus back to operating trends. The positive buzz
surrounding Watch Dogs 2 (due on 15 November) and Ghost Recon Wildlands (8 March) and the
promising reception to the alpha version of For Honor (due in February) reinforce our confidence in
the strong line-up and delivery of guidance for FY16/17e (EUR1,700m sales, EUR230m operating
profit). These new highs should lend credence to the ambitious MT plan (sales of EUR2,300m,
operating profit of EUR440m in FY18/19e or a 20% operating margin).
We remain buyers – stars aligned for a further rerating – TP raised from EUR34 to EUR39.5
A unique play on video gaming listed in Europe, the stock continues to offer reasonable multiples in
our view (14x FY17/18e EBIT vs c.15x for EA and c.16x for Activision, which are trading at
historical highs) in light of its compelling growth story and speculative appeal. Our TP (raised to
EUR39.5) is now based on 12x FY18/19e EBIT of c.EUR440m, discounted back (vs 10x before).