Artwork for Ubisoft’s upcoming “Assassin’s Creed Shadows” game.
John Keeble | Getty Images
Ubisoft Stocks surged on Friday after the French video game publisher announced a deal to spin out some of its bestselling franchises.
On Thursday, Ubisoft revealed plans to form a new gaming subsidiary along with the Chinese technology giant Tencent We will invest 1.16 billion euros ($1.25 billion) in the unit.
The subsidiaries include Ubisoft’s most well-known game brands, including Assassin’s Creed, Far Cry and Tom Clancy’s Rainbow Six, according to a press release.
Ubisoft’s shares jumped 11% on Friday morning before 9% gaining in the second half of the day.
The game maker said Thursday that the newly formed units will “focus on building a gaming ecosystem designed to be truly evergreen and multi-platform.”
According to Ubisoft, the investment from Tencent is valued the new Euro 4 billion subsidiary. This is more than twice the market capitalization of Ubisoft.
Investors have hoped to move to resolve the uncertainty surrounding the future from Ubisoft after a series of challenges faced by the company in recent years.
Ubisoft is plagued by issues ranging from financial struggles to delays to several key games, including the recently released title of Assassin’s Creed Shadows.
In February, the company reported that it suffered from a 52% drop in quarter online bookings for the third quarter, with poor performance in some key games.
The Tencent-backed spinoff structure is “innovative and aims to highlight the value of Ubisoft’s top franchise, but it also doesn’t give away the overall control to Tencent on paper,” Piers Harding-Rolls, research director for the games at Ampere Analytics, told CNBC in an email.
“However, we expect cross-platform expansion to be strong in order to make the most of these franchises, especially in areas where you have deep expertise, such as mobile and PC gaming, and generally have more influence,” he added.
Doug Creutz and Mei Lun Quach of TD Cowen said they don’t think they’ll solve the prolonged issues affecting the rest of Ubisoft, which will continue to exist after the transaction is closed.
The spinoff “will lead to additional complexity for investors who want to cherish the company,” they said in a memo Thursday, adding that “it appears to be driven by the Guillemott family’s desire to maintain effective control of Ubisoft’s parents.”
An investment bank analyst added, “It’s not clear that the remaining ‘everything else’ is of great value in a market where big franchises are becoming increasingly dominant.”
The deal is expected to close by the end of 2025, with all necessary regulators pending.
Michael Pachter, managing director of equity research at Wedbush Securities, said Ubisoft’s management thinks “it’s overly optimistic that this will lead investors to appreciate the company much more.”
“The rest of Ubisoft is burdened with high operating expenses and liabilities. The company is magically unworthy just because it separates the good from the bad,” he added.
Last week, Ubisoft released the latest title for Assassin’s Creed Shadows, the latest in Ubisoft’s top game franchise.
The game secured positive reviews in the general public and scored an average reviewer score of 82 on the review aggregation site Metallicik.
