According to's "well-placed sources in the development industry," a deal between Microsoft and Lionhead is in the final stages and could be only a few days away from being announced. Claims that an acquisition would result in job losses at Lionhead, in addition to the 50 staff made redundant earlier this month, have been denied by Lionhead founder Peter Molyneux.

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

Microsoft has reportedly beaten off strong opposition from Ubisoft in securing a deal with Lionhead, with sources claiming that "Ubisoft are furious," having "thought they had it in the bag." At this time Microsoft and Lionhead are refusing to comment on the legitimacy of the rumour.