China’s Tencent increases stake in “Assassin’s Creed” maker Ubisoft

PARIS/HONG KONG Sept 7 (Reuters) – Tencent Holdings Ltd ( 0700.HK ) is increasing its stake in Ubisoft Entertainment SA ( UBIP.PA ) in a deal that values ​​France’s biggest game developer at about $10 billion , as deep-pocketed Chinese tech executives continue their search overseas for growth.

The interest in Ubisoft comes as the world’s biggest games firm by revenue is slowing growth at home with acquisitions including 16.25% of Japan’s Elden Ring developer FromSoftware announced just a week ago – at the same time local rival NetEase Inc ( 9999.HK ) said it would buy French game maker Quantic Dream. Read more

The latest deal makes Tencent Ubisoft’s single largest shareholder with a total stake of 11%, which could further increase to 17%. It also values ​​the creator of the “Assassin’s Creed” and “Tom Clancy’s” video game franchises at $10 billion, or about 80 euros per share, well above Tuesday’s closing stock price level of 43.5 euros.

The move also caps a difficult four-year period at Ubisoft, where there have been a series of new game delays and sexual harassment allegations that led to a top management shakeup. The firm’s share price has since fallen from around 100 euros to less than 44 euros on Tuesday.

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

The transaction also makes Tencent part of a shareholder pact with Ubisoft’s founding Guillemot family. The pact includes Tencent’s acquisition of 49.9% of Guillemot Brothers Limited – the holding company that owns most of the family’s 15% stake in Ubisoft – with 5% voting rights, Ubisoft said in a statement on Tuesday evening.

The social network and China’s largest gaming firm, whose investment in Guillemot Brothers amounts to 300 million euros ($296 million), also has the right to increase its direct stake in Ubisoft to 9.99% from 4.5% currently , according to the statement.

Reuters reported in early August, citing people with direct knowledge of the matter, that Tencent planned to increase its stake in Ubisoft with the goal of becoming the French company’s single largest shareholder. Hong Kong-listed Tencent saw its shares close up 1% on Wednesday. Read more

Tencent will not be able to sell its shares for five years, beyond which the Guillemot family will have a preemptive right to buy the shares, Ubisoft said. It also said that Tencent pledged not to increase its direct stake in the French game maker beyond 9.99% in equity for a period of eight years.

Tencent, which bought its first 5% of Ubisoft for 66 euros per share in 2018, is also providing Guillemot’s holdings with a long-term loan to refinance its debt, Ubisoft said.

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

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

The deal is likely to help Tencent offset pressure in its home market, where the gaming regulator has not granted any new licenses to Tencent games since June last year, analysts said.

Overall revenue in the world’s biggest video game market fell for the first time in the January-June period, a report showed, as it continued to suffer from increased government surveillance. Read more

China began intense scrutiny of its high-growth technology sector about two years ago, partly alarmed by what regulators called “disorderly capital expansion” caused by buying sprees.

Tencent last month reported its first quarterly revenue decline, hurt in part by a lack of game approvals and regulations that limit play time. Read more

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Reporting by Tassilo Hummel, Mathieu Rosemain, Josh Ye and Julie Zhu; Editing by Leslie Adler, Christopher Cushing, and Jonathan Oatis

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