Tencent invests $1.25bn in new Ubisoft subsidiary focused on top IP

Ubisoft has created a new subsidiary responsible for its most lucrative IP with investment from Tencent that values the unit at €4 billion ($4.3 billion).

The Chinese publishing giant, already a shareholder in the company, is pumping €1.16bn ($1.25bn) for a 25% stake in the new entity. The valuation is said to be based on a 4x multiple on average sales between FY23 to FY25 (forecasted).

Ubisoft’s new unit will hold the licences for its top franchises Tom Clancy’s Rainbow Six, Assassin’s Creed and Far Cry, in exchange for a royalty. It will also include teams based in Montréal, Quebec, Sherbrooke, Saguenay, Barcelona, and Sofia. The new subsidiary will be headquartered in France.

The deal leaves out a number of the company’s development teams, notably in France and the UK, as well as IP such as Watch Dogs. 

In its release, the publisher noted the new unit may leverage “disruptive technologies” on selected new IPs, despite an apparent focus on its hits.

Influential investor

Ubisoft claimed the move “significantly reinforces” its balance sheet. It also claimed the agreement followed a formal and competitive process exploring and assessing different strategic options.

Tencent is an influential shareholder in the publisher. In 2022, it invested $300m for a 49.9% stake in Guillemot Bros, run by Ubisoft's co-founders who control the largest stake in the company. It also holds its own stake in Ubisoft's overall business worth close to 10%.

By law, an investor that acquires 30% or more of shares of a public company in France must make a takeover bid.

It’s not currently clear what this deal means for the rest of Ubisoft’s business. The company has undergone a number of layoffs and studio closures over the past couple of years.

The publisher's share price has also dived amid its troubles, which included the lower-than-expected sales of Star Wars Outlaws and delay of Assassin's Creed Shadows. Speculation has been rife about the company's future, with the company exploring strategic options before today's announcement.

Completion of the deal with Tencent is expected before the end of 2025, subject to regulatory approval.

More details on the company’s future operating model will be shared at a later date, the publisher said.

"More focused organisation"

“Today Ubisoft is opening a new chapter in its history,” said Ubisoft CEO and co-founder Yves Guillemot.

“As we accelerate the company’s transformation, this is a foundational step in changing Ubisoft’s operating model that will enable us to be both agile and ambitious. We are focused on building strong game ecosystems designed to become evergreen, growing high-performing brands and creating new IPs powered by cutting-edge and emerging technologies.

“With the creation of a dedicated subsidiary that will spearhead development for three of our largest franchises and the onboarding of Tencent as a minority investor, we are crystalising the value of our assets, strengthening our balance sheet, and creating the best conditions for these franchises’ long-term growth and success. With its dedicated and autonomous leadership team, it will focus on transforming these three brands into unique ecosystems.

“We are committed to building a sharper, more focused organisation-one where talented teams will take our brands to the next level, accelerate the growth of emerging franchises, and lead innovation in next-generation technologies and services, all with the goal of delivering enriching, memorable games that exceed players' expectations, and create superior value for our shareholders and other stakeholders.”