French video game developer Ubisoft saw its shares tumble by more than 17% on Wednesday after Chinese tech giant Tencent increased its stake in the company.
The Assassin’s Creed maker had reportedly been drawing buyout interest from several private equity firms, with Blackstone and KKR & Co. studying the company’s viability as an investment.
Tencent plans to invest $296.9 million in Guillemot Brothers Limited — the parent company of Ubisoft. The pending investment will provide Tencent with a 49.9% stake in Paris-based Ubisoft.
- Tencent will use $198 million to buy an indirect stake in Ubisoft.
- The remaining capital will be invested in Guillemot Brothers Ltd.
- The Guillemot family currently holds a 15% stake in Ubisoft.
- Ubisoft has a market capitalization of $4.42 billion.
The deal allows Tencent to raise its direct stake in Ubisoft from 4.5% to 9.99% — which includes voting rights. However, Tencent will not be allowed to sell its shares in Ubisoft for a five-year period or increase its stake from 9.99% for eight years.
Underwhelming Results
Ubisoft reported $293 million in net bookings in fiscal Q1 — surpassing the company’s estimates of $279 million — but a 10% decrease compared to the same period the year prior.
Tencent generated $19.77 billion in revenue in Q2 2022, a 3% decrease compared to Q2 2021, while revenue for domestic and international games fell 1% year-over-year during the quarter to $4.7 billion and $1.6 billion, respectively.
Q2 2022 marked Tencent’s first-ever year-over-year revenue decline.
