Visitors to the Gamescom trade fair 2022 in Cologne play at a booth of the gaming company Ubisoft.
(Photo: IMAGO/Rüdiger Wölk)
Dusseldorf With investments of 300 million euros, the world’s largest gaming provider Tencent has strengthened its position as a Ubisoft shareholder. The group increased its direct stake in the largest European video game manufacturer from 4.5 percent to 9.99 percent. In addition, Tencent bought 49.9 percent of the shares in the holding company Guillemot Brothers Limited, through which the Ubisoft founding family Guillemot will continue to control the business. This is according to a statement from the company.
Tencent is considered the most valuable company in China and, in addition to holdings in the video game industry, is also a shareholder in the social media service Snapchat, the music platform Spotify and the car manufacturer Tesla. Tencent’s own productions include the chat service WeChat, which has been criticized for allegations of censorship and espionage, and Asia’s leading messenger Tencent QQ.
Industry insiders see Ubisoft as a takeover candidate. Since April, there have been unconfirmed reports that private equity firm Blackstone and investor Kohlberg Kravis Roberts & Co. are interested in buying the company. The company is open to this. “If anyone wants to make an offer for Ubisoft, they can do that and it will be looked at by the board,” Ubisoft chief financial officer Frederick Duguet said, according to financial services firm Bloomberg.
However, the increase by Tencent pushed the mood on the stock exchange down: Although the deal between Tencent and Ubisoft is good for Ubisoft itself, it dampens the speculation of the past few months, the Reuters news agency quotes analysts and traders as saying. On Tuesday evening, the Ubisoft share closed at EUR 43.50 and fell further on Wednesday to only EUR 36.12 at times. The company posted its biggest one-day loss in nine years, according to Reuters.
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In the event of a takeover, Tencent has now secured itself by increasing its stake. The group is required to hold its Ubisoft shares for at least five years. The Chinese are prohibited from increasing direct shares beyond 9.99 percent in the next eight years.
>> Read here: Stagnating sales, frustration among bosses: The side effects of China’s tech regulation
The Ubisoft founding family will be certain about the shareholder structure in the coming years, writes the Bloomberg news service. According to a company announcement, Tencent and the Guillemot brothers now jointly hold 29.9 percent of the voting rights in the gaming company based in Saint-Mandé near Paris. An analyst from Midcap Partners told the Reuters news agency that the chances of a takeover by the Chinese group that investors have been waiting for are dwindling as a result of the purchase ban.
Tencent is expanding its gaming division
Ubisoft needs this structural security: the developer recently failed in a planned implementation of NFTs in its games and was also late with the continuation of its successful series “Assassin’s Creed” last summer. The game series is the most successful franchise in the company’s history and is one of the best-selling video game products ever. Tencent’s investments are intended to help Ubisoft regain its old success in a timely manner.
Tencent now directly and indirectly owns 11.3 percent of the group’s shares in Ubisoft. Long-term lending to the Guillemot brothers’ holding company makes additional share purchases possible. Tencent is therefore likely to play an important role in the company even after a possible investor purchase. According to calculations by the financial services provider Bloomberg, the Chinese group could ultimately hold up to 16.8 percent of the shares in Ubisoft.
Tencent recently sharpened its gaming portfolio significantly: In recent years, the group has invested in the Japanese game developer FromSoftware and bought the British gaming company Sumo Group for $1.26 billion. In return, the group sold shares in the online retailers JD.com and Singapore’s Sea, partly due to pressure from Chinese supervisory authorities.
Ubisoft is Germany’s largest employer in the games industry. According to the online portal “Games Wirtschaft”, the company employs 975 people (August 2022) in Germany at the Düsseldorf, Berlin and Mainz locations.
More: Skills shortage in the games industry – Why Innogames publishes salary bands for the first time.