updated 1/5/2005 4:18:01 PM ET 2005-01-05T21:18:01

Shares in French video games publisher Ubisoft Entertainment SA surged Wednesday on a report that it discussed a "white knight" deal with Vivendi Universal SA to fight a possible takeover bid from U.S. rival Electronic Arts Inc.

Financial daily L'Agefi said telecoms and media giant Vivendi had discussed a possible merger with Ubisoft to thwart Electronic Arts, which announced last month it had acquired a 20 percent stake in Ubisoft, a maker of games, including the hit Splinter Cell series.

Vivendi denied that negotiations were happening."In view of the rumors reported in the press, Vivendi Universal denies that any negotiations are taking place concerning the takeover of Ubisoft," the company said in a statement.

Ubisoft declined to comment on the report, which cited an anonymous source familiar with the talks.

Ubisoft shares closed 10.9 percent higher at 27.50 euros ($36.37) as investors raised their hopes for a full-blown bidding war.

Electronic Arts, whose hit titles include NBA Street and the SimCity series, said it made the initial acquisition to keep its options open after the Ubisoft stake was put up for sale by Dutch television mogul John de Mol.

But Ubisoft has said it viewed the move as "hostile" and accused the California-based games publisher of seeking to take it over by stealth before Ubisoft's development work on games for a new generation of consoles is reflected in its share price.

"They're trying to benefit from our creative efforts before they're valued by the market with the release of new consoles," said Ubisoft spokesman Emmanuel Carre.

Ubisoft's share price has risen more than 60 percent since Electronic Arts announced its acquisition, including Wednesday's jump.

Analysts said a merger between Ubisoft and Vivendi's loss-making games division could be a good fit.

"The games portfolios are fairly complementary," said Brice Mari of Paris-based Exane BNP Paribas.

Such a deal would also allow Ubisoft chairman Yves Guillemot, whose family holds 18 percent of the company, to maintain operational control, Mari said.

"But from the point of view of a minority shareholder it would be better to have a strong offer from Electronic Arts, since they're bound to go further on price."

Electronic Arts declined to comment on its plans or the possibility of an imminent takeover offer for Ubisoft.

But company spokesman Jeff Brown sounded a note of skepticism about the prospect of a Ubisoft-Vivendi deal, pointing out that it could be complicated by the significant stake his company already holds in Ubisoft -- subject to regulatory approval.

"If at any point they decide to sell this company that 20 percent is going to be a very important part of that equation," Brown said.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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