Ubisoft seeks partner to help fend off Electronic Arts

PARIS (AP) - Ubisoft Entertainment SA is considering a merger with a sister company, its founding chairman and CEO confirmed Thursday, as the French video games maker moves to fend off a possible takeover bid from U.S. rival Electronic Arts, Inc. 

Yves Guillemot said a tie-up with Gameloft, in which his family holds a controlling stake, was "one of the things we are looking at,'' along with a deal with other potential investors. 

Analysts say a merger between the two software companies could strengthen the Guillemot family's hand against a possible takeover bid from Electronic Arts, which announced last month it had bought almost 20 percent of Ubisoft. 

"We're currently in discussions with many players, including Electronic Arts and others,'' Guillemot also said. 

He was speaking on a conference call with analysts and reporters after Ubisoft posted revenue of euro186 million (US$240.61 million) for its fiscal third quarter ending Dec. 31, 18 percent lower than the year-earlier period but in line with analysts' expectations. 

Asked about his talks with California-based Electronic Arts - publisher of NBA Street and the SimCity series - Guillemot said: "We still don't have a clear vision of what their objectives are precisely.'' 

He said Ubisoft, whose titles include Ghost Recon II and the Splinter Cell series, was "discussing with French institutional investors and people across the world who might allow us to keep our independence and to grow.'' 

Analysts say Electronic Arts' acquisition could be the prelude to a full takeover bid or a defensive step to prevent Ubisoft falling into a competitor's hands. 

Ubisoft said soon after the announcement that it considered the move as hostile, while Electronic Arts, the world's No.1 video games publisher, initially said it bought the stake to preserve its "strategic options.'' 

It has since softened its tone, saying it spoke to Ubisoft and others about "partnerships'' - while still not ruling out a takeover bid. 

French Industry Minister Patrick Devedjian met with Guillemot earlier this month amid growing calls for government intervention to protect the French software firm from a foreign takeover. 

Devedjian said last week he was watching the situation "with attention and concern.'' 

Guillemot suggested Thursday that Ubisoft was looking outside the games industry for a potential investment partner, saying that the company's distribution network would be of greater value to an entertainment company seeking an entry into video games. 

In the absence of a 'white knight,' however, a merger between Gameloft and Ubisoft could give the Guillemots a holding in the combined entity that would be just short of the 'blocking minority' required to thwart a takeover. 

That could leave the future of France's biggest games software company in the hands of a state-owned bank, the Caisse des Depots et Consignations, which owns 6 percent of Ubisoft. 

"On a subject like this it's clear that (the CDC) would discuss it with the government,'' Devedjian's spokeswoman said. 

Ubisoft said Thursday that its guidance for the year was unchanged, with fourth-quarter revenue expected to top euro220 million (US$285 million) and earnings before interest and tax of euro40 million-euro45 million (US$52 million-US$58 million) in the full year to March 31, 2005. 

Sales in 2005-2006 should top euro600 million (US$776 million) with earnings over euro55 million (US$71 million), the company said. - AP 

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