Tencent increases investment in French video games maker Ubisoft

Tencent has agreed to increase its investment in French video games maker Ubisoft in a deal that values in the family-controlled group at more than €10bn.

The move comes amid a wave of consolidation in the video gaming sector that has seen independent studios snapped up by tech giants. As one of the few remaining independent players making big budget titles, Ubisoft has long been seen as a takeover target, although the founding Guillemot family has long fiercely protected it, including from a raid by Vivendi in 2015.

Under the agreement announced on Tuesday, the Chinese tech giant agreed to pay €300mn to buy a 49.9 per cent stake in Guillemot Brothers Limited, a vehicle that holds some of the family’s shares, but it will have only 5 per cent voting rights in the entity and no board representation.

Tencent also has the option to increase the 4.5 per cent direct stake it has owned in the maker of Assassin’s Creed and Just Dance since 2018 to up to 9.99 per cent.

The deal implies a valuation of €80 per share for Ubisoft, which is significantly higher than the closing price on Tuesday of €43.50.

The two would act in concert under a shareholders’ pact, they said in a joint statement.

“The expansion of the concert with Tencent further reinforces Ubisoft’s core shareholding around its founders and provides the company with the stability essential for its long-term development,” said Yves Guillemot, Ubisoft’s chief executive, in a statement.

“As a result of this transaction, Ubisoft’s governance will remain unchanged and Tencent will not have any operational veto rights,” he added.

Tencent has signed a standstill agreement that it will not sell its Ubisoft shares for five years nor raise its stake past 9.99 per cent for eight years.

“We are excited to expand our engagement with the founders, the Guillemot family,” said Tencent president Martin Lau, adding that Tencent planned to “bring some of Ubisoft’s most well-known AAA franchises to mobile”.

Dealmaking has been rife in the sector since the start of the pandemic, a period that brought about a sharp rise in gaming as other forms of entertainment disappeared.

Big tech and entertainment companies are eager to get their hands on gaming studios with well known and successful titles, with strong intellectual property seen as the most prized asset in an industry that already dwarfs other forms of mass-market entertainment, including music and film.

Starting with the purchase of a majority stake in US group Riot Games in 2011, Tencent has amassed a sprawling portfolio of gaming investments across the US, Europe and Asia.