...The problem for EA, analysts say, is that Ubisoft elevated its estimated value. "At the beginning of the year it seemed Ubisoft management would be happy to do a deal at somewhere between 32 and 38. They seem now to have upped the ante to something north of 40," said Jérémie Carrot, a media and video games analyst at ETC Pollak Prebon. "It is normal to ask for a premium, but it could also imply that they are discussing with someone else."
EA refuses to bid higher than about 35, French financial newspaper Les Echos reported, without citing sources.
News of the breakdown of those talks left Ubisoft to again proclaim its desire to remain independent only it sent a conflicting message.
At the game conference, Yves Guillemot, Ubisoft CEO and a member of the group's founding family, told reporters "our preference is to remain independent." But Guillemot also said he is still open to an acquisition and has been in talks with entertainment companies.
Not surprisingly, that did little to calm speculation. Analysts at Salomon Smith Barney Thursday set Ubisoft a price target of 43.50, citing the likelihood it will become a target for major media groups. Which media groups has Ubisoft been talking to? Guillemot isn't saying, but analysts suggest a U.S. media conglomerate, such as Walt Disney Co. or Time Warner Inc. could emerge.
"Guillemot seems to favor a media company and that makes sense given the closer relationship between games and movies," said Laurent Daure, a Paris-based analyst with Kepler Equities.
France's own media group, Vivendi Universal SA, is seen as a likely suitor. On May 20, shares in Ubisoft shot up almost 3% to 35.75 on rumors that Vivendi was preparing a bid.
That move followed a conference call between Vivendi CFO Jacques Espinasse and analysts in which Espinasse said the group's debt would likely increase to about 5 billion by the end of the year as a result of a undisclosed projects. Vivendi's debt stands at 4.4 billion. Ubisoft, valued at about 660 million, would neatly account for the difference.
"It would make sense operationally; VU Games' pipeline looks a little empty two to three years out," Carrot said.
Vivendi may also be under political pressure to do a deal. For one, such a deal would create a French national champion with critical mass in the video games sector.
Moreover, in August, Vivendi received favorable tax treatment in exchange for an agreement to create and maintain jobs in France. The recent merger of its fixed-line telecommunications business, Groupe SFR Cégétel, with Neuf Telecom SA will likely cost jobs. "Keeping Ubisoft French, at least in name, could help Vivendi's relationship with the government," Carrot said.
