Ubisoft Unveils Restructuring Plan with Billion-Euro Investment

To overcome financial difficulties, Ubisoft announced on Thursday that they would establish a new subsidiary focused on their top properties like "Assassin's Creed," collaborating with Chinese company Tencent.

The newly formed entity, worth approximately four billion euros ($4.3 billion), will have Tencent holding a 25% stake through an investment of 1.16 billion euros.

Alongside "Assassin's Creed", the subsidiary will bring together "Far Cry" and "Tom Clancy's Rainbow Six" -- among the most popular long-running names in Ubisoft's roster of game universes.

It seems Ubisoft is capitalizing on the successful release of the newest "Assassin's Creed" installment, "Shadows," which was crucial for their upcoming plans.

The terms of the Tencent agreement prohibit the French company from relinquishing its controlling stake in the subsidiary during the initial two-year period.

Tencent cannot increase its stake for the next five years -- unless Ubisoft loses its majority in the mean time.

Chief executive Yves Guillemot called the step a "new chapter in (Ubisoft's) history".

The past year was fraught with challenges for Ubisoft, marked by multiple underwhelming launches of anticipated titles and a decline in their stock 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, fortify our financial position, and set optimal circumstances for these brands’ sustained expansion and achievement,” according to Guillemot.

This agreement further strengthens Tencent's control over Ubisoft following their involvement in 2022.

The Chinese firm holds almost 10 percent of the group's stock -- a threshold it is not allowed to cross before 2030 -- while the founding Guillemot family owns around 15 percent.

Breaking the streak

earlier this year, Ubisoft mentioned that they were "proactively investigating several strategic and financial alternatives."

Frederick Duquet, the finance director, stated on Thursday that they had "received numerous expressions of interest which materialized into multiple non-binding proposals covering various alternatives."

Ultimately, the directors decided to establish the subsidiary because doing so enabled Ubisoft to retain control over its crucial resources, with an aim to develop extremely valuable brands potentially worth several billion dollars in the future, Duquet explained.

Ubisoft plans to make further announcements on changes to the group at a later stage.

The company's market capitalisation stood at 1.7 billion euros by close of trading in Paris Thursday -- or less than half the valuation of the new subsidiary.

The teams dedicated to the three primary franchises will converge into a new entity based in France, with particular emphasis on involving Ubisoft's Montreal studios — which stands as one of the biggest 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 from Ubisoft’s series of underwhelming releases.

Despite this, the team will proceed with a cost-reduction strategy established at the beginning of 2023. This initiative includes shutting down facilities located outside France and reducing their workforce by 2,000 employees.

Ubisoft's challenges mirror broader stagnation in the video game industry over the last couple of years.