To overcome financial challenges, Ubisoft announced on Thursday that they plan to establish a new subsidiary focused on their top properties like “Assassin’s Creed,” collaborating with China’s leading tech company Tencent.
The newly formed entity, worth approximately four billion euros ($4.3 billion), will have Tencent holding a 25% stake by investing 1.16 billion euros as fresh capital in return.
In addition to “Assassin’s Creed,” the subsidiary will also gather “Far Cry” and “Tom Clancy’s Rainbow Six” — two of the most prominent series within Ubisoft’s portfolio of gaming franchises.
It seems Ubisoft is capitalizing on the successful release of the newest installment in the “Assassin’s Creed” series, titled “Shadows,” which has been crucial for their upcoming plans.
The terms of the Tencent agreement prohibit the French company from dropping below a controlling stake in the subsidiary during the initial two-year period.
Tencent is unable to raise its ownership stakes for the next half-decade — unless Ubisoft ceases to have a controlling interest in the interim period.
CEO Yves Guillemot referred to this move as a “new era for (Ubisoft)”.
The past year was tough for Ubisoft, marked by multiple underwhelming launches of anticipated big-budget titles and a decline in their share value.
Launching the new subsidiary — whose name hasn’t been revealed yet — by year-end will allow the firm “to enhance the valuation of our assets, reinforce our financial position, and set up optimal circumstances for these brands’ sustained expansion and prosperity,” Guillemot stated.
This agreement further strengthens Tencent’s control over Ubisoft following their involvement in 2022.
The Chinese company possesses nearly 10 percent of the group’s shares — a limit they cannot exceed until 2030 — whereas the founding Guillemot family owns approximately 15 percent.
Breaking the streak
Earlier this year, Ubisoft had said that it was “actively exploring various strategic and capitalistic options”.
Frederick Duquet, the finance director, stated on Thursday that they had “received numerous expressions of interest which resulted in several non-binding proposals covering various alternatives.”
Ultimately, the decision was made to establish the subsidiary, enabling Ubisoft to retain control over its crucial resources, with the aim of developing extremely valuable global brands potentially worth several billion dollars in the future, Duquet explained.
Ubisoft intends to share additional updates regarding modifications within the group at a future date.
By the end of trading in Paris on Thursday, the company’s market capitalization was valued at 1.7 billion euros, which is under half the worth of the newly formed subsidiary.
The teams handling the three primary franchises will unite within the newly established unit based in France, with particular emphasis on Ubisoft’s Montreal studios — which stands as one of the biggest facilities within the company.
Altogether, the publishing company has approximately 18,000 employees globally, with 4,000 based in France.
Since its launch on March 20, “Assassin’s Creed Shadows” has attracted three million players, marking a significant turnaround following a series of underwhelming releases for Ubisoft.
Despite this, the team will continue moving forward with a cost-reduction strategy established at the beginning of 2023. This initiative includes shutting down facilities located outside of France and eliminating approximately 2,000 positions.
Ubisoft’s challenges mirror broader stagnation in the video game industry over the last couple of years.