Chinese gaming company Tencent wants to invest heavily in Ubisoft to expand

Tencent Holdings Ltd, a Chinese gaming and social media company, has reportedly contacted Ubisoft, the developer of popular titles such as Assassin’s Creed and Rainbow Six Siege, in an effort to increase its stake in the French company.

Tencent, most famous for its popular mobile game “Honor of Kings”, has not disclosed how much it plans to spend on Ubisoft, but according to those in the know, the company is “determined to seal the deal as Ubisoft such an important strategic asset for Tencent.” The source claims that the price per share could be close to the historic price ceiling – that was 158 AUD per share in 2018.

The Chinese company made great strides in western markets – in 2016, Tencent bought a majority stake in Supercell, the developer of popular mobile games such as Clash of Clans and Clash Royale. Tencent also has interests in companies such as Epic Games, famous for Fortnite, as well as Riot Games, famous for League of Legends.

The reason for Tencent’s expansion? China’s crackdown on the video game market. In 2020, China froze video game approvals for eight months in June last year. They have resumed approvals since April this year, but none of the approvals included Tencent. Tencent reported a 1% loss in sales in China in the first quarter, but also an international sales increase of 4%.

Meanwhile, Ubisoft has fallen into decline in recent years, with the company forecasting lower operating profit for fiscal year 22-23. The company hopes to turn that around in the near future, with upcoming releases such as Skull and Bones and Avatar: Frontiers of Pandora. “We’re talking more than 20% revenue growth,” CEO Yves Guillemot said, speaking to analysts about the company’s prospects.

In recent years, however, Ubisoft has missed expectations, causing analysts to pause for a moment. Guillemot continued, stating that they don’t expect to need to merge with other companies: “We have everything we need to remain independent.” This comes just shortly after a series of game cancellations were announced by the company and a statement of support for a game reportedly being cancelled.

Original coverage by Reuters.

Written by Junior Miyai on behalf of GLHF.

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