Tencent increases its stake in ‘Assassin’s Creed’ maker Ubisoft

A man rides an electric bike past the Tencent headquarters in Nanshan district of Shenzhen, Guangdong province, China. REUTERS/David Kirton

Chinese tech giant Tencent is increasing its minority stake in Ubisoft in a deal with the company’s founding family that values France’s biggest video game maker at more than 10 billion euros ($9.88 billion) amid a wave of buyouts in the industry.

The deal underscores the appetite of deep-pocketed Chinese gaming giants for foreign studios and comes just a week after the acquisition by NetEase of unlisted French video games maker Quantic Dream.

It also caps a difficult four-year period at Ubisoft, home to the “Assassin’s Creed” and “Tom Clancy’s” video game franchises, marked by a succession of delays of new video games and allegations of sexual harassment that led to a revamp of its top management. Ubisoft’s share price has fallen by more than half over the period, from about 100 euros to less than 44 euros on Tuesday.

The transaction makes Tencent part of a shareholder pact with Ubisoft’s founders, the Guillemots, and gives it a total stake in the video game maker of more than 11 percent through the acquisition of a stake in the family holding.

The UbiSoft Entertainment logo is seen at the Paris Games Week (PGW), a trade fair for video games in Paris, France. REUTERS/Benoit Tessier

This includes the acquisition by Tencent of a 49.9 percent stake with 5 percent voting rights in Guillemot Brothers Limited, Ubisoft said in a statement.

Tencent’s investment in Guillemot Brothers Limited, which owns the bulk of the family’s 15 percent stake in Ubisoft, amounts to 300 million euros, at an implied valuation of 80 euros per Ubisoft share. That values Ubisoft at more than 10 billion euros.

China’s largest social network and gaming firm also has the right to raise its direct stake in Ubisoft to 9.99 percent from 4.5 percent currently, said Ubisoft.

Tencent saw its Hong Kong-listed shares drop more than 2 percent in morning trade on Wednesday.

Reuters reported in early August, citing sources with direct knowledge of the matter, that Tencent planned to raise its stake in Ubisoft as the Chinese gaming giant pivots to the global gaming market.

“Tencent is a key shareholder partner for many of the industry’s leaders, who have created some of the most outstanding video games,” Chief Executive Officer Yves Guillemot said. “This transaction reinforces our ability to create strong value over the coming years.”

The Chinese firm will not be able to sell its shares for a five-year period, beyond which the Guillemot family will have a pre-emptive right to buy the shares, Ubisoft said.

Tencent also pledged not to increase its direct stake in Ubisoft beyond 9.99 percent in capital for a period of eight years.

Matthew Kanterman, director of research at Ball Metaverse Research Partners, said such a deal structure does not seem to be a change to the long-standing strategic partnership between the two firms.

“Overall it’s a bet by Tencent that Ubisoft can improve its execution and unlock value in its catalog of intellectual property, the pair can create new mobile games based on that IP and that they can bring existing Ubisoft titles into China once the regulatory climate improves,” he said.

Tencent, which bought its first 5 percent stake in Ubisoft in 2018, is also providing the Guillemot’s holding with a long-term loan to refinance its debt, the group said.

($1 = 1.0119 euros)