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EA offer for Take-Two a mixed blessing for Ubisoft?

EA's hostile bid for Take-Two Interactive might be seen as a mixed blessing by rival Ubisoft

EA's hostile bid for Take-Two Interactive might be seen as a mixed blessing by rival Ubisoft.

According to a Dow Jones newswire article, the move puts more pressure on Ubisoft to grow its business quickly.

Ubisoft could consider bidding for Take-Two itself, although Dow Jones writer Sean Walters thinks getting caught in a bidding war would be financially daring, if not foolhardy.

Ubisoft's market capitalisation is approximately EUR 2.7 billion, not much more than the EUR 1.5 billion it would take to purchase Take-Two if the price reached USD 30 per share.

Instead, he speculates that Ubisoft could take a serious look at another US developer such as THQ whose market cap is within the company's reach. Even so, a combined Ubisoft/THQ would have an annual revenue of about EUR 1.4 billion - compared to EA's EUR 2.1 billion.

With few game developers of sufficient size to allow Ubisoft to rapidly build up its business, Ubisoft must rely on its capacity to continue generating strong organic growth to keep predators at bay.

Walters does point out that one consequence of EA's purchase of Take-Two might be that the company could decide to sell the 15 per cent stake it currently owns in Ubisoft.

While this would probably be welcome news for Ubisoft, it could also open the door to other media companies with an eye towards acquisition. Time Warner, for example, currently has a 10 per cent stake in SCi but might see Ubisoft as a better investment it can easily afford.

Convincing Ubisoft CEO Yves Guillemot and his family to sell Ubisoft is another matter, as the company's net profit has doubled over the past two years and the stock price has risen some 71 per cent over the past year.

Walters says the question is - as games industry consolidation intensifies - how long can Ubisoft afford to stay independent?

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