5 Sep — 11 Sep / 2022

Weekly News Digest #37


# of announced deals
announced deals’ size
# of closed deals

Tencent invests $297m in Ubisoft


Tencent invests $297m in Ubisoft

Tencent Ubisoft

Tencent (SEHK: 700) has acquired a 49.9% stake in Guillemot Brothers, the company of the founders and the largest shareholders of France-based Ubisoft (EPA: UBI).

Transaction  Details

The investment size is $297m (€300m), including a $198m share acquisition and a $99m capital increase. The deal values Ubisoft at €80 per share, which accounts for around 86% premium to the company’s ~€43 share price on September 6, 2022, when the deal was announced.

The stake also gives Tencent 5% voting rights in Guillemot Brothers, but the Chinese giant won’t be represented on the board, or get any consent or veto rights over the business. Guillemot Brothers Limited will still be exclusively controlled by the Guillemot family.

With this deal, Tencent has increased its 4.5% direct stake in Ubisoft to 9.99% of the capital and voting rights. Moreover, Tencent will not be able to sell Ubisoft’s stake for 5 years, as well as, most importantly, to increase its stake beyond 9.99% for 8 years. As in the case with Guillemot Brothers, Ubisoft’s governance will remain unchanged, with Tencent not having any operational veto rights.

The deal also allows Tencent to enter The Guillemot family concert — Ubisoft’s founders’ structure, which owns the stake in Ubisoft. With the transaction, The Guillemot family concert now owns 24.9% of Ubisoft, while Tencent owns 4.1% of it. This sounds a bit more complicated than it actually is, so have a look at The Guillemot family concert shareholders structure below.

Ubisoft structure

Source: Ubisoft

In addition, Tencent will provide Guillemot Brothers Limited with a long-term unsecured loan to refinance its debt. The loan will also support any minority acquisition of Ubisoft by Guillemot Brothers in the future.

Strategic Rationale

The deal was announced a few days after we had learned about NetEase (NASDAQ: NTES) acquiring France-based PC & Console games developer Quantic Dream, and Tencent increasing its stake in Japanese PC & Console games developer FromSoftware. We covered both of the deals in our previous digest, where we also wrote about the ongoing competition between NetEase and Tencent. Both companies are actively expanding into the Western PC & Console segment, so it seems pretty logical as to why Tencent went for the deal. But what’s in it for Ubisoft?

On Ubisoft Forward 2022, which occurred on September 10, 2022 the company shared lots of new information regarding its current focus. One of the most interesting things noticed there was Ubisoft’s further active expansion to mobile.

In the near future, the company is going to release mobile games based on Rainbow Six, Tom Clancy’s The Division, and Assassin’s Creed famous IPs. Ubisoft has also announced three mobile games exclusively for Netflix (NASDAQ: NFLX): a sequel to puzzle-adventure game Valiant Hearts, rogue-lite hack-and-slash game Mighty Quest, and an original mobile game based on the Assassin’s Creed franchise.

With two upcoming mobile Assassin’s Creed games, Ubisoft is taking the mobile venture seriously, and this seems about time. Apart from a few AC games, Assassin’s Creed: Mirageand Assassin’s Creed Infinity (Code Red and Code Haxe), the company’s AAA pipeline includes only Skull & Bones, a pirate-genre game that was in a troubling development for almost a decade, and Mario and Rabbids 2, co-developed with Nintendo. Thus, the mobile releases may become a good way to fill in for the cash-flow gaps between AAA releases of the company.

The company has been actually pursuing the stabilization of its Revenue flows for quite some time now. Apart from its multiplayer games with GaaS monetization like The Division and Rainbow Six: Siege, the company has also introduced in-game purchases in single-player games like Assassin’s Creed, especially in the last three instalments. Now, the company continues its deep dive to GaaS, making Assassin’s Creed Infinity, shifting Trackmania to the F2P model, and preparing a subscription-based Rocksmith+ guitar-learning rhythm game for launch.

Considering all this, closer relationships with Tencent might be especially beneficial for the company. First, Tencent will develop mobile titles based on popular Ubisoft franchises. And here we cannot but mention again the rivalry with NetEase, which has developed one of the biggest titles in the industry in collaboration with another Western company: Diablo Immortal. Tencent did the same even earlier with CoD Mobile, so both companies seem to follow pretty much the same strategy here. Considering the deep mobile expertise and large budgets Tencent has, and the popularity of Ubisoft’s IPs, we have all the reasons to expect some huge announcements from Tencent in the future.

Second, it will provide Ubisoft with bigger access to the largest Chinese market, and support the launch of several Ubisoft’s PC titles in the region.

With all the benefits and synergies mentioned, it is especially interesting that there is no opportunity for Tencent to acquire a controlling stake at Ubisoft, at least during the next 8 years. Ubisoft clearly values its independence, which these days has become something pretty unusual for the industry.


We want to thank Hiro Capital and The Games Fund for supporting this digest.


TGF Investgame



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