Tencent to buy 49.9% stake in Ubisoft Entertainment | The Financial Express

Tencent to buy 49.9% stake in Ubisoft Entertainment

Tencent initially took a 5% stake in Ubisoft in 2018 to help it thwart a hostile takeover from Vivendi

Tencent to buy 49.9% stake in Ubisoft Entertainment
Ubisoft's status as one of the few remaining independent video game publishers has also fueled interest after Microsoft Corp. agreed to buy Activision Blizzard.

Tencent Holdings Ltd is set to more than double its stake in Ubisoft Entertainment SA, giving the founding Guillemot brothers breathing room to get the company back on track without giving up control of the French video game publisher known for its Assassin’s Creed franchise.


Tencent will buy 49.9% of the Guillemot Brothers Ltd. holding company, according to a statement published Tuesday. The Chinese tech giant will pay 200 million euros ($198 million) to buy an indirect stake in Ubisoft at an implied value of 80 euros a share, and invest a further 100 million euros in the holding company. The transaction also authorizes Tencent to raise its direct stake to 9.99% from 4.5% currently. Governance at Ubisoft will remain unchanged, and Tencent will not have any operational veto rights.

Ubisoft’s US-traded shares jumped as much as 17% on Tuesday, the most since a Bloomberg report in April that it had attracted preliminary takeover interest from buyout funds including Blackstone Inc. and KKR & Co. Ubisoft has been seen as a takeover target as concerns over delayed launches and allegations of widespread sexual misconduct pushed the stock down about 45% since the start of last year. Its status as one of the few remaining independent video game publishers has also fueled interest after Microsoft Corp. agreed to buy Activision Blizzard.

Tencent’s increased involvement will give the brothers, who founded Ubisoft in 1986, some certainty in the shareholder register while the recovery plan takes hold. Chief Executive Officer Yves Guillemot introduced cost cuts and in July reduced the full-year sales target as Ubisoft announced a delay to its upcoming Avatar game from the 2022 holiday season to the next fiscal year.

The deal with Tencent “helps us bring stability in the shareholding of the company,” Guillemot said in an interview.

Tencent initially took a 5% stake in Ubisoft in 2018 to help it thwart a hostile takeover from Vivendi. The Shenzhen-based company has investments in gaming publishers all over the world, including Epic Games and Activision Blizzard Inc., and its sway over the Chinese internet economy has made it a target of Beijing’s efforts to curb the influence of tech industry leaders. Tencent has yet to have a new video game approved by regulators, even though state officials have been allowing new titles following an industry-wide hiatus intended to curb addiction.

Ubisoft said the latest deal includes a partnership with Tencent to bring some of its biggest franchises to mobile platforms, but it is also helpful at a time when Ubisoft has been struggling.

Ubisoft has faced a weak lineup of games, several delays and a talent retention problem in the wake of a 2020 sexual misconduct scandal that led to the ousting of multiple top executives. Over the summer, the company also delayed Assassin’s Creed Mirage, a smaller entry in the popular action franchise. Mirage will be set in Baghdad and look to return to the franchise’s stealth roots, Bloomberg reported. Ubisoft will hold an event Saturday to reveal more on the future of Assassin’s Creed as well as other upcoming games.

However, the founding family will retain control. Tencent will not be able to sell its shares in Ubisoft for five years, and after that the Guillemot family will have priority claim on any sale. In addition, Tencent will not be able to increase its stake in Ubisoft beyond 9.99% of Ubisoft’s capital and voting rights for eight years.

After the purchase from the Guillemot brothers, Tencent will have an 11.3% total stake in Ubisoft. It could hold as much as 16.8% of the business through the increase to its direct holding that’s been authorized, according to Bloomberg calculations.

The agreement may allow the total stake in Ubisoft held by Tencent, the family and Guillemot Brothers to rise to 29.9% of Ubisoft voting rights, according to the statement. Tencent is also providing the holding company with a long-term unsecured loan that to repay debt.

The transactions still leave room for another investor to step in.

“If someone wants to make a bid for the whole of Ubisoft, it still can, and the bid will be reviewed by our board,” Chief Financial Officer Frederick Duguet said in an interview.

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First published on: 07-09-2022 at 08:51 IST