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Gameloft lays out all the reasons the Vivendi takeover is a bad idea

Gameloft lays out all the reasons the Vivendi takeover is a bad idea

March 30, 2016 | By Christian Nutt

In a detailed new press release, Gameloft's board of directors has offered a scathing response to Vivendi's takeover bid, rejecting it outright -- pledging not to share their shares to the company, and explaining in detail why the deal would be bad for Gameloft.

Under French law, Vivendi was forced to make a formal bid for ownership of Gameloft after crossing a 30 percent stake in the company, after buying up its stock in recent months.

With statements like "the offer launched by Vivendi has no strategic interest for Gameloft" and "the Board of Directors unanimously considers that the offer is not in accordance with the interests of the Company, of its shareholders and of its employees," Gameloft's management has made its position on the deal clear.

If you read further into the document, the board tears down the arguments Vivendi made for the takeover one-by-one, and offers a host of reasons its members reject the deal.

It's worth noting that Gameloft didn't simply release this statement to the wild for anyone to read; it's a translation of an official document registered with the AMF, the French equivalent of the Securities and Exchange Commission. 

So what's wrong with the deal?

There's the basic fact that the offer undercuts Gameloft's current stock price by 1.4 percent, of course. But management also argues that any synergies Vivendi suggests will occur post-takeover are illusory, and that its offer is actively hurting Gameloft.

"... the way Vivendi entered in the capital of Gameloft, as well as the hostile nature of its tender offer, are likely to destabilize the company and its teams, will impede the implementation of the company's strategy," the release reads.

Gameloft argues that given that Vivendi's media business is in pay TV and music, any synergies between the two companies are minor; Vivendi can't offer Gameloft any enticing deals in the telecom or internet space, either, management claims. 

The most scathing comments, however, come from Gameloft's analysis of Vivendi's management of Activision. Vivendi once owned the publisher, but Activision parted ways almost three years ago. Vivendi sold the last of its stock in the company in January. 

So what happened there? "Vivendi does not have any specific know-how in the video game industry since the sale of Activision," Gameloft management claims. "The recent sale of Activision by Vivendi illustrates its lack of strategic vision in the long term in the gaming industry," it counters. 

"Moreover, the unfavorable trend of revenues and profitability of Activision over the last years during which the group was held by Vivendi illustrates its lack of knowledge of value creation levers in the gaming industry," the statement continues.

And the company rejects claims that Vivendi could shore up its finances, too: "Gameloft has demonstrated its ability to generate cash while pursuing its organic development."

"To conclude, the Board of Directors considers unanimously that the offer which is initiated by Vivendi has no strategic interest for Gameloft and the contemplated partnership won't create substantial synergies for Gameloft shareholders nor accelerate the industrial project of the company."

On the other hand, it could destabilize the company further, Gameloft argues -- by jeopardizing its relationship with Disney, with which it recently co-launched Disney Magic Kingdoms

It also puts developer and management talent in jeopardy, Gameloft argues: "the threat of an unsolicited takeover of Gameloft by Vivendi has already led to a destabilization of the teams of Gameloft and the Group, who represent the Group's real strength, and may lead to a significant number of staff departures, in particular of creative people" and "the departure of the management team who established the Company as a worldwide leader in the industry."

All in all, it's a resounding and thorough rejection of the takeover bid.

Gameloft isn't the only company Vivendi is buying up; it's also purchased shares of Ubisoft, though not enough to trigger a mandatory bid for the company. For its part, Ubisoft's management is seeking investment to keep that from happening, and has gone so far as to meet with Canadian prime minister Justin Trudeau to help ensure the cooperation of the Canadian government in fending off its would-be suitor.

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