Ubisoft shares, the creator of Assassin's Creed, rose 12% on Friday after the company announced plans to create a subsidiary in which Tencent will invest €1.16 billion, as the French video game maker seeks to recover from poor results in 2024, UNN reports, citing Reuters.
Details
In an effort to recover from the disappointing results of some of the company's core games, the Guillemot family, the founder and largest shareholder of Ubisoft, began exploring possible negotiations with the Chinese technology giant in September.
Ubisoft said on Thursday that the new division would be valued at approximately €4 billion ($4.32 billion) and would combine the Assassin's Creed, Far Cry and Tom Clancy's Rainbow Six brands.
CEO Yves Guillemot said on Thursday that he would develop the three franchises and help Ubisoft strengthen its balance sheet.
If the deal closes by the end of 2025, the group's debt situation will become much more comfortable, Barclays analysts said on Friday.
"Ubisoft gains financial flexibility through the cash infusion, which is about two-thirds of the firm's market capitalization prior to the announcement," investment analytics firm Morningstar said in a note.
After rising about 12% in early trading, the Paris-listed shares were up 8.7% to €14 per share at 10:59 GMT, for a total market capitalization of €1.8 billion.
"This transaction underscores the significant undervaluation of the group, which could lead to a reduction in the rest of its business," said broker Midcap Partners.
Ubisoft has lost nearly half of its market value in the past year as the company reported lower-than-expected results and warned of falling sales and game release delays.
In February, it stated that its net bookings for the third quarter fell by 52% year-on-year.
"The Tencent deal is a strategic corrective step for Ubisoft," Erste analysts said in a note.
Addition
Last week, the video game maker released "Assassin's Creed Shadows," the latest installment in the franchise, hoping that a return to its best-selling series would turn the page on high-profile failures, including "Avatar: Frontiers of Pandora" and "Star Wars Outlaws."
The game has been met with positive reviews and promising early sales, leading to an almost 8% jump in its shares on March 24.