Weekly News Digest #13

France-based gaming giant Ubisoft Entertainment (PAR: UBI) unveiled a transformative step in its restructuring efforts, forming a new subsidiary dedicated to its flagship franchises—Assassin’s Creed, Far Cry, and Tom Clancy’s Rainbow Six—with China-based tech giant Tencent Holdings (SEHK: 700) investing $1.25B (€1.16B) for a 25% minority stake in the subsidiary. 

Transaction Background & Details

Tencent has acquired a 5% stake in Ubisoft as part of Vivendi’s exit in 2018 from the company following a failed takeover bid. The current $1.25B investment marks Tencent’s third major transaction with Ubisoft, following a Sep’22 agreement where the Chinese conglomerate acquired a 49.9% stake in Guillemot Brothers, the holding company owned by the founders and largest shareholders of the French gaming giant while increasing its direct stake in Ubisoft from 4.5% to 9.99% of the share capital and voting rights. Notably, the earlier deal included an eight-year standstill clause preventing Tencent from increasing its ownership or acquiring additional voting rights beyond agreed thresholds. Shifting market dynamics and Ubisoft’s need to strengthen its financial position, including reducing leverage, have prompted a strategic reassessment. For Tencent, this presents an opportunity to expand its presence in the AAA segment. 

The new deal values the subsidiary at a pre-money enterprise value of $4.3B (€4B), implying an average annual sales FY23–FY25E multiple of approximately 4x. Ubisoft retains 100% of the subsidiary’s voting rights and majority ownership. 

The subsidiary, headquartered in France, will operate autonomously with teams across Montréal, Barcelona, Sofia, and other key studio locations. It aims to evolve these franchises into “evergreen ecosystems” by:

• Improving the quality of narrative-driven solo games;
• Enhancing multiplayer offerings with consistent content updates;
• Implementing some of the free-to-play models and elements;
• Integrating social features

The subsidiary will receive full rights to Tom Clancy’s Rainbow Six, Assassin’s Creed, and Far Cry franchises via worldwide, exclusive, irrevocable, perpetual license in exchange for a royalty.

The agreement includes call-and-put options, allowing Ubisoft to repurchase Tencent’s stake and enabling Tencent to exit in the event of a change of control at Ubisoft. The exercise share price will be the higher of the new subsidiary’s fair market value and the same EBIT multiple in the case of a Ubisoft control transaction. 

Strategic Rationale

Tencent’s strategic investment offers Ubisoft a lifeline to stabilize its finances after underperforming AAA titles (Avatar: Frontiers of Pandora, Star Wars Outlaws, Assassin’s Creed Mirage). The non-controlling stake provides liquidity without triggering foreign acquisition regulations, preserving Ubisoft’s operational autonomy.

As part of its broader restructuring, Ubisoft is splitting its operations into two distinct business units. A newly formed entity will monetize core IPs such as Assassin’s Creed, Far Cry, and Tom Clancy’s Rainbow Six. At the same time, the parent company will focus on other strategic areas, including Tom Clancy’s Ghost Recon, The Division, proprietary game engines, new IP development, and online services.

For Tencent, the deal increases its exposure to one of the few remaining major independent publishers capable of producing large-scale PC & Console titles based on globally recognized IP. The partnership also facilitates long-term collaboration opportunities. For Ubisoft, the investment strengthens its balance sheet, reduces net debt, and supports long-term growth initiatives.

We thank MY.GAMES and TrapPlan for supporting this digest.

MERGERS & ACQUISITIONS

[UPD] South Korea-based mobile game developer DoubleU Games (KRX: 192080) has completed the acquisition of a 60% stake in Turkey-based mobile game developer Paxie Games for a total consideration of $67m, with a $27m upfront payment and a $40m earn-out consideration. DoubleU Games also has the option to acquire the remaining 40% of Paxie Games over the next three years.

South Korea-based gaming holding KRAFTON (KRX: 259960) has acquired a 75% stake in India-based mobile games developer Nautilus Mobile for $14m. The acquisition is part of Krafton’s strategy to expand its presence in the Indian gaming market. Additionally, Krafton plans to support Nautilus Mobile’s global expansion. The studio, known for its cricket titles, including Real Cricket 24 and Real Cricket Premier League, will continue to operate independently. Krafton previously invested in the company $5.4m in Feb’22.

China-based mobile games developer Moonton Technology, a subsidiary of ByteDance, has sold the publishing rights of Mobile Legends to US-based PC & Console games developer Skystone Games for an undisclosed sum. The transaction follows increasing regulatory restrictions on China-owned companies operating in the US, including those affecting ByteDance.

Germany-based AAA game studio Gunzilla Games has acquired US-based gaming magazine Game Informer for an undisclosed sum. The acquisition includes the website, magazine, and the original team, with Game Informer set to continue operating independently. Game Informer was previously shut down by its former owner, GameStop (NYSE: GME), in Aug’24.

VENTURE FINANCING

France-based VC fund Kameha Ventures has launched a $27m (€25m) investment fund. The facility will focus on early-stage game technology companies, including AI, spatial computing, 3D graphics, and cloud infrastructure.