China's Tencent increases stake in 'Assassin's Creed' maker Ubisoft

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

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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 around 10 billions of dollars, as deep-pocketed Chinese tech majors continue their search for overseas growth.

Interest in Ubisoft comes as the world’s largest games company by revenue meters slows growth at home with purchases including 16.25% of Japanese developer “Elden Ring” FromSoftware announced just ago a week – at the same time domestic rival NetEase Inc (9999.HK) said it would buy French game maker Quantic Dream. Read more

The latest deal makes Tencent the largest shareholder in Ubisoft with an overall stake of 11%, which can be further increased up 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 price of 43.5 euros.

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The move also caps a difficult four-year period at Ubisoft, where there were a succession of new game delays and sexual harassment allegations that led to a senior management overhaul. The company’s share price fell from around 100 euros to less than 44 euros on Tuesday.

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

The transaction also makes Tencent part of a shareholders’ agreement with the founding family of Ubisoft Guillemot. The pact involves Tencent’s acquisition of 49.9% of Guillemot Brothers Limited – the holding company that owns the bulk of the family’s 15% stake in Ubisoft – along with 5% voting rights, Ubisoft said in a press release on Tuesday evening.

China’s largest social media and gaming company, 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% against 4.5% currently, according to the press release.

Reuters reported in early August, citing people with direct knowledge of the matter, that Tencent planned to increase its stake in Ubisoft in a bid to become the French company’s largest shareholder. Hong Kong-listed Tencent saw its shares close 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 right of first refusal to buy the shares, Ubisoft said. He also said Tencent had pledged not to increase its direct stake in the French game maker beyond 9.99% stake for an eight-year period.

Tencent, which bought its first 5% of Ubisoft for 66 euros per share in 2018, is also granting the Guillemot holding company a long-term loan to refinance its debt, Ubisoft said.

The structure of the deal does not appear to alter the longstanding strategic partnership between the two companies, said Matthew Kanterman, director of research at Ball Metaverse Research Partners.

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

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

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

China began scrutiny of its high-growth tech sector about two years ago, in part alarmed by what regulators have called “the disorderly expansion of capital” caused by acquisitions.

Tencent announced its first-ever quarterly revenue decline last month, partly affected by a lack of game approvals and regulations limiting playtime. Read more

($1 = 1.0122 euros)

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

Our standards: The Thomson Reuters Trust Principles.

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