Ubisoft’s September 29 shareholder 
meeting looks set to be a fraught affair due to the entrance of Vivendi on the company’s share register. Vivendi, under the direction of its chairman, Vincent Bolloré, has been building its stake up in the French gaming company over the past year, amassing a 22.8% holding by July of 2016. The actions of Vivendi have been the source of significant concern for the Guillemot brothers, the executive directors who founded Ubisoft in the 1980s and currently hold approximately 9% of its share capital, prompting them to announce the purchase of additional shares to bolster their position in the face of a potential takeover.
Clearing out the Gameloft
The concern shown by the Guillemot brothers likely reflects Vivendi’s recent takeover of Gameloft, another gaming company founded by the Guillemot family. In February 2016, Vivendi announced that it had acquired 30% of Gameloft’s share capital, the threshold at which one is required to launch a public tender offer in France, and by the end of May Vivendi held approximately 61.7% of Gameloft’s capital. As a result, the public tender offer was extended, and Vivendi indicated its intention to change the composition of Gameloft’s board, depending on the result of the extended public offer.
On June 20, Vivendi announced that it held over 95% of Gameloft’s share capital, the threshold at which they would ordinarily be required to squeeze-out any remaining shareholders and delist Gameloft’s shares. However, Vivendi did not immediately move to squeeze out remaining shareholders. Instead, Vivendi proposed the removal of Gameloft’s existing board – including the Guillemot brothers – at the AGM itself, as is possible for shareholders attending shareholder meetings in France, under L.225-105 of the French Commercial Code. Vivendi then appointed a board of its choosing, before proceeding to the squeeze-out of any remaining shareholders.
It should be noted that Vivendi has not actually acquired a controlling stake in Ubisoft, and has announced that it has no intention to launch a takeover bid, at least for another six months. Rather, it has indicated that it would like to have a good working partnership with Ubisoft, and given that Ubisoft retains control of trademarks related to some of the mobile games produced by Gameloft, it is in their best interests to do so. However, chairman and CEO Yves Guillemot has stated that Vivendi would not be a good partner for Ubisoft, as Vivendi does not have a sufficient understanding of the gaming industry.
The Rupert Murdoch of Europe?
The concerns of the Guillemot family may also reflect Mr. Bolloré’s track record of using minority holdings to pursue control and profit goals, as in the case of Bouygues, Aegis and more recently, Vivendi itself. Mr. Bolloré used minority holdings to exercise control of the mentioned companies and, aside from Vivendi, eventually forced other shareholders to buy-out his holdings at an elevated price.
Vivendi has been on a significant buying spree of late, one which has puzzled some observers, who have noted that Mr. Bolloré believes he can establish Vivendi as a media conglomerate on a par with Disney, Time Warner and other industry leaders. Shareholders seem to doubt the wisdom of this strategy, which is the suggested cause of a dip in the company’s share price during the past year. Vivendi has continued undeterred, however, acquiring holdings in numerous media companies during the past year, including Mediaset, Banijay Group, Radionomy Group and Telecom Italia, as well as launching takeovers of Canal + and Gameloft.
Guillemot v. Bolloré: Round II
In the case of Ubisoft, it is unclear whether Bolloré has ambitions beyond a good working relationship; however, Vivendi has already indicated that it would like to have a representative on Ubisoft’s board. As noted above, French law allows shareholders attending shareholder meetings to propose the removal or replacement of board members at the meeting. Should this occur, shareholders not present or represented at the AGM would not be able to consider the merits of the proposed actions; however, they can take action by pre-emptively choosing to either give their vote to the chairman, or simply abstain from voting, which based on the proxy form would count as an against vote.
Given Ubisoft’s dispersed shareholder structure, with many foreign investors, it is possible that Vivendi could be in a position to replace board members with its own representatives, if shareholders not attending the meeting do not take some action. Ubisoft has been amending its governance structure over the past few years, most recently by proposing the appointment of two new independent directors at the upcoming meeting, including one with strong ties to Silicon Valley. Whether these efforts will be enough to convince institutional shareholders to support the Guillemot brothers and maintain Ubisoft’s independence from Vivendi will be determined next week.