VU Games merging with Ubisoft?

The day after it was revealed that the French government may intervene to protect Ubisoft from a possible takeover by Electronic Arts, Reuters is reporting the company may have another suitor.

The news service quoted an article in French newspaper L'Agefi that reports Vivendi Universal Games is considering buying Ubisoft. L'Agefi cites a source close to the proposed deal as saying the two companies have already held talks on a possible merger, though the article did not mention how far those talks have progressed.

In response, VU Games released a terse statement denying it was planning any takeover of Ubisoft. "In view of the rumors reported in the press, Vivendi Universal [Games] denies that any negotiations are taking place concerning the takeover of Ubisoft," read the entire text of the release from VU's Paris headquarters. Ubisoft had not commented as of press time.

Were Ubisoft and Vivendi to merge, the combined company would be the largest publisher in Europe, a title currently held by Atari parent Infogrames. Ironically, Infogrames CEO Bruno Bonnell hinted to Reuters yesterday that his company might help Ubisoft fend off a takeover by EA. "It would be a pity to see great European creations end up in a relatively hegemonic US conglomerate," he said.

However, analysts were quick to point out that neither VU Games nor Infogrames is exactly flush with cash. Both companies saw a lot of red ink in 2004, with VU games suffering an operating loss of EUR 185 million ($245.3 million) during the first three quarters of the year. By contrast, Electronic Arts has $2.5 billion in cash on hand, according to Reuters, which is far more than Ubisoft's EUR 375 million ($497.36 million) market value.

Regardless of whether any of it pans out, all the takeover talk has been a boon for Ubisoft's stock. The company's share price has increased more than 60 percent since Electronic Arts bought 19.9 percent of the company in December 2004, thus raising the price of Ubisoft's share to EUR 27.50 ($36.47).