Microsoft closes in on Lionhead deal

Chatter at the Game Developers Conference in San Jose is strongly suggesting that Microsoft is on the verge of signing a deal to acquire British developer Lionhead, with rival bidder Ubisoft reported to be out of the running.

Well-placed sources in the development industry claim that the two companies are in the final stages of negotiation and may announce the deal within the coming days - but Lionhead founder Peter Molyneux has flatly denied claims that further job losses could happen at the studio in the wake of the acquisition.

"We have downsized from three studios to two and are now happy with the shape and size of Lionhead," Molyneux told GamesIndustry.biz today. "There are no plans for any further job losses."

Earlier this month, the Surrey-based studio laid off 50 staff and scaled back its project portfolio to two titles, in a move seen as a response to the poor commercial performance of PC titles The Movies and Black and White 2.

Lionhead boss Peter Molyneux' supposed attempts to sell the studio have been the subject of speculation for several years - with stock market flotation known to be under consideration at one point, while more recently the firm has been attached to possible suitors including Elevation Partners, Electronic Arts, Ubisoft and Microsoft.

Now it would appear that this saga is finally reaching an end, with Microsoft - publisher of the studio's only successful console title, Fable - closing in for a final bid, while Ubisoft, the other company reportedly left in the negotiations, has been left on the sidelines. "Ubisoft are furious," one insider told us this week at GDC, "they thought they had it in the bag."