Tencent has invested $1.25 billion in a new Ubisoft operating division that includes the core games Assassin’s Creed, Far Cry and Tom Clancy’s Rainbow Six brands.
Ubisoft, the French video game giant that has struggled to launch hits until its most-recent launch of Assassin’s Creed: Shadows, said it is accelerating its transformation with this important step.
The company said it is rapidly evolving its operating model with the creation of a dedicated subsidiary based on its Assassin’s Creed, Far Cry, and Tom Clancy’s Rainbow Six brands.
Following the formal and competitive selection process initiated by the Group earlier this year, Tencent will invest €1.16bn ($1.25 billion) for a minority stake in the new subsidiary. This new subsidiary will focus on building game ecosystems designed to become truly evergreen and multi-platform.
Backed by greater investment and boosted creative capacities, it will drive further increases in quality of narrative solo experiences, expand multiplayer offerings with increased frequency of content release, introduce free-to-play touchpoints, and integrate more social features.
Financial details and legal matters
This transaction values the entity at a pre-money enterprise value of c.€4 billion ($4.3billion), implying a FY23-FY25E average sales multiple of around four times. It highlights the strong value of Ubisoft’s IPs, significantly reinforces its balance sheet, and enables the company to continue its efforts to become a more agile organization, unleash the full creative potential of its teams and better align its resources with the constantly evolving expectations of players.
The binding agreement with Tencent follows the formal and competitive process in exploring and assessing different strategic options announced earlier this year. Based on the careful consideration of several expressions of interest received from diverse parties, and its duty to act in the best interests of all Ubisoft stakeholders, the board of directors, upon recommendation from the ad hoc committee, determined that this transaction crystalized the best value for Ubisoft’s assets and unanimously approved the proposed transaction on March 27, 2025.
The board of directors has, upon ad hoc committee recommendation, appointed Finexsi acting as independent expert in view of the issuance of a fairness opinion.
A new chapter
In parallel to the creation of this new entity, Ubisoft will focus on nurturing the development of iconic franchises including Tom Clancy’s Ghost Recon and The Division, accelerating the growth of top performing titles and leveraging disruptive technologies on selected new IPs, while continuing to deliver state-of-the-art production game engines and online services. More details on the group’s future operating model will be shared at a later stage.
“Today Ubisoft is opening a new chapter in its history,” said, Yves Guillemot, CEO, in a statement. “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.”
He added, “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 crystalizing 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.”
Guillemot concluded, “We are committed to building a sharper, more focused organization-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.”
Martin Lau, president of Tencent, said in a statement, “We are excited to extend our longstanding partnership with Ubisoft through this investment, which reflects our continued confidence in Ubisoft’s creative vision and exceptional talent to drive sustained success in the industry. We see the immense potential for these franchises to evolve into long-term evergreen game platforms and create engaging new experiences for gamers.”
Relationship between the new subsidiary and Ubisoft Entertainment
The new subsidiary would include the teams developing the Tom Clancy’s Rainbow Six, Assassin’s Creed and Far Cry franchises based in Montréal, Quebec, Sherbrooke, Saguenay, Barcelona, and Sofia as well as the back-catalog and any new games currently under development or to be developed.
The new subsidiary would be granted by Ubisoft a worldwide, exclusive, irrevocable, perpetual license in respect of the intellectual property and similar proprietary rights owned or licensable by Ubisoft in relation to Tom Clancy’s Rainbow Six, Assassin’s Creed and Far Cry in exchange for a royalty.
Some reaction
“Well it seems like a pretty good deal for Ubisoft which has really struggled,” said David Cole, an analyst at DFC Inteligence, in a message to GamesBeat. ” The three franchises in question are classics but have under performed recently, although I hear the delayed but just released Assassin’s Creed is pretty good. “
He said a couple of things stood out to him.
“Tencent is really willing to spend to get into Western markets. They have quite a portfolio and even if they pay top dollar they can afford it,” Cole said.
And he added, “It highlights how valuable video game IP has become. Classic franchises can be revived with proper investment and have significant intrinsic value.”
Michael Pachter, an analyst at Wedbush, said in a message to GamesBeat that he thinks Ubisoft is hopeful it will somehow ‘unlock’ value.
“It’s a hard one to understand. They will have to license their own content from their subsidiary in order to provide a return to the investors in the subsidiary, which means that Ubisoft parent will have less profits and Ubisoft subsidiary will have profits to show for its ‘investors’ and presumably will have to somehow retain those profits,” Pachter said. “It should be all end up zero sum (Ubisoft without the subsidiary’s valuation is worth less; Ubisoft plus the subsidiary’s valuation is worth the same as before). Somehow, they are arguing that the subsidiary is worth €4 billion, but Ubisoft itself is worth only €2.4 billion or so.”
Pacter added, “I suppose it is possible that the subsidiary is worth €4 billion and the rest of the company is worth €(1.6) billion, which reflects the company’s debt balance, but I’m not sure that investors will embrace the idea that Ubisoft is worth more overall because they ‘unlocked’ value by moving their IP to a separate subsidiary.”
Main terms of the binding agreement with Tencent
Tencent would invest in the new subsidiary which is headquartered in France and 100% owned by Ubisoft immediately prior to the transaction. Specifically, at closing of the transaction, Tencent would invest a total amount of 1.16 billion euros for an approximate 25% economic interest in the new subsidiary, that will be used to strengthen Ubisoft’s balance sheet by significantly reducing its consolidated net debt position, accelerate the Group’s transformation, and sustain growth of selected franchises.
After closing of the transaction, the new subsidiary would remain exclusively controlled and consolidated by Ubisoft.
Conditions for to the transaction
The deal requires the issuance of a fairness opinion from Finexsi acting as independent expert; completion of the carve-out to create the new subsidiary; obtention of the necessary regulatory clearances; and Ubisoft can unilaterally waive the issuance of the fairness opinion as a condition precedent.
Completion of the transaction is expected before the end of 2025.
The new subsidiary would have a dedicated leadership team, supervised by a board of directors, focused on enhancing creative vision and streamlining operations, with the authority to make swift, high-impact decisions across development, marketing, and distribution, to ensure these brands continue to evolve, attract new audiences, and deliver groundbreaking gaming experiences for years to come.
Tencent would benefit from customary minority protection rights as well as certain consent rights on the disposals of the important new subsidiary assets Other provisions in relation to Tencent’s shareholding in the New subsidiary notably include: A five-year lock-up undertaking on new subsidiary shares held by Tencent, unless Ubisoft no longer owns a majority of new subsidiary voting rights and share capital
Ubisoft may not cease to hold a majority of new subsidiary voting rights and share capital for a two-year period.
Customary share transfer provisions, including, a right of first refusal to the benefit of Ubisoft, a right of first offer to the benefit of Tencent, tag-along right to the benefit of Tencent, and drag-along right to the benefit of Ubisoft (subject to certain conditions).
Call option to the benefit of Ubisoft and put option to the benefit of Tencent in the event of certain change of control of Ubisoft approved by its Board of Directors – Exercise price will be the higher of (i) the fair market value of New subsidiary shares and (ii) the same EBIT multiple as that in the change of control transaction of Ubisoft; it being specified that for the call option there will be a specific minimum price protection during the first 4 years following closing of the transaction with Tencent.
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