Tencent increases its stake in Assassin’s Creed maker Ubisoft
- The Tencent deal underscores the appetite of Chinese gaming giants for foreign studios and comes after NetEase bought Quantic Dream
- China’s largest social network and gaming firm also has the right to raise its direct stake in Ubisoft to 9.99 per cent from 4.5 per cent currently
Chinese tech giant Tencent Holdings 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 (US$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 to less than €44 on Tuesday.
Tencent says no ‘external pressure’ to divest as reports to the contrary persist
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 per cent through the acquisition of a stake in the family holding.
This includes the acquisition by Tencent of a 49.9 per cent stake with 5 per cent 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 per cent stake in Ubisoft, amounts to €300 million, at an implied valuation of €80 per Ubisoft share. That values Ubisoft at more than €10 billion.
China’s largest social network and gaming firm also has the right to raise its direct stake in Ubisoft to 9.99 per cent from 4.5 per cent currently, said Ubisoft.
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 per cent 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 catalogue 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 per cent stake in Ubisoft in 2018, is also providing the Guillemot’s holding with a long-term loan to refinance its debt, the group said.
