Image: Ubisoft
Tencent has poured another small fortune into one of the biggest gaming companies. Ubisoft announced on Tuesday that the Chinese conglomerate would increase its investment in the Assassin’s Creed maker by nearly $300 million through a series of sophisticated financial maneuvers.
Instead of buying Ubisoft shares outright, Tencent is acquiring a 49.9 percent economic stake in Guillemot Brothers Limited, the main investment vehicle through which Ubisoft’s founders have managed their control of the French publisher over the years. This is in addition to an existing 4.5 percent stake in Ubisoft. Tencent paid almost double what the shares are currently worth to make it happen.
Although Tencent now owns more of Ubisoft than the Guillemot family, Tencent, which has slowly been buying up parts of other studios and publishers in the video game industry, will only hold 5 percent of the voting rights within Guillemot Brothers Limited. The message that Ubisoft CEO Yves Guillemot and the other founders want to send is clear: This is not a takeover.
Here are some more details of the new arrangement:
- Tencent is acquiring a 49.9 percent stake in Guillemot Brothers Limited for around $80 per share.
- Tencent will provide additional money to the Guillemot family to refinance their debt and acquire more equity from Ubisoft.
- Guillemot Brothers Limited is “solely controlled by the Guillemot family”.
- Tencent and the Guillemot family will now control up to 29.9 percent of Ubisoft.
- Tencent can now buy up to 9.99 percent of Ubisoft shares directly.
- Tencent can’t increase its stake for eight years, can’t sell its stake for five years, and will give the Guillemot family the first share if it sells.
- Ubisoft’s leadership will remain unchanged and Tencent will have no “operational veto powers.”
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News of a potential deal with Tencent was first reported by Portal in early August. And before that, there were reports of private equity interested in potentially buying into Ubisoft as well. It’s all coming amid a major industry consolidation after Take-Two bought Zynga earlier this year and Microsoft is trying to get regulatory approval to acquire Activision Blizzard.
But Ubisoft’s position is still unique. The company faced a spate of workplace grievances following a summer of 2020 settlement with reports of employee misconduct and struggled to find a new hit outside of the Assassin’s Creed franchise amid constant production delays and mediocre releases. After another disappointing financial quarter, CEO Yves Guillemot also urged employees to cut spending wherever possible in July.
Tencent hasn’t fared too well either. Over the past year, tens of billions of dollars have evaporated and thousands of employees have been laid off for the first time in nearly a decade due to falling revenue. At least part of the problem stems from the failure to obtain licenses to release new games in China. The company’s partnership with Ubisoft includes bringing PC versions of the publisher’s biggest franchises to China, as well as assisting in the release of mobile adaptations.
However, the recent turmoil hasn’t slowed Tencent’s ongoing spending spree in gaming. In addition to the Ubisoft deal, just last week the company announced a $260 million joint investment with Sony in Elden Ring maker FromSoftware. That’s because of a number of other recent investments in smaller companies like Life is Strange maker Dontnod.