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.
