Core Insights - Ubisoft reported its earnings figures for FY2024-25, highlighting a challenging year with mixed dynamics across its portfolio but managed to generate positive free cash flow [6][9][10] Financial Performance - FY2024-25 IFRS 15 sales were €1,899.2 million, down 17.5% from €2,300.9 million in FY2023-24 [39] - Net bookings for FY2024-25 amounted to €1,846.4 million, a decrease of 20.5% compared to €2,321.4 million in the previous fiscal year [40] - Free cash flow was reported at €128 million, driven by cash flow from operating activities of €169 million [2][7] - Non-IFRS operating income was a loss of €15.1 million, compared to a profit of €401.4 million in FY2023-24 [41] Key Metrics - Digital net bookings were €1,585.4 million, down 20.2%, representing 85.9% of total net bookings [3] - The company maintained a solid balance sheet with a cash position of approximately €1 billion and net debt reduced to €885 million [4][44] - Unique active players for Assassin's Creed and Rainbow Six franchises remained stable at around 30 million each, while Far Cry maintained around 20 million [3][14] Strategic Initiatives - Ubisoft is pursuing a transformation strategy, planning to announce a new overall Group organization by the end of the year to better serve player needs and improve game quality [4][11] - A new subsidiary backed by Tencent is being created to accelerate growth of three leading IPs, with the transaction expected to close by the end of 2025 [12][27] - The company has achieved its initial cost reduction program ahead of schedule, targeting an additional €100 million in fixed cost reductions over the next two years [8][33] Product Development and Releases - The launch of Assassin's Creed Shadows on March 20, 2025, received strong praise, achieving the second-highest Day 1 sales in franchise history [15][16] - The game has logged 160 million hours of playtime, indicating strong player engagement [15] - Upcoming expansions and new content for Assassin's Creed Shadows are planned, including the Claws of Awaji expansion [17][18] Market Outlook - For FY2025-26, Ubisoft expects stable net bookings year-on-year and approximately breakeven non-IFRS operating income [47] - The company anticipates a return to positive non-IFRS operating income and free cash flow generation in FY2026-27, supported by significant content from its largest brands [49]

Core Insights - Ubisoft announced a deal to spin out some of its best-selling franchises, leading to a surge in its shares [1] - Tencent is investing 1.16 billion euros ($1.25 billion) into a newly formed gaming subsidiary that will include major franchises like Assassin's Creed, Far Cry, and Tom Clancy's Rainbow Six [1][2] - The new subsidiary is valued at 4 billion euros, which is more than double Ubisoft's current market capitalization [2] Financial Performance - Ubisoft shares jumped 11% following the announcement of the new subsidiary [2] - The investment from Tencent indicates strong market confidence in the new unit's potential to create evergreen and multi-platform game ecosystems [2] Strategic Moves - The formation of the new subsidiary aims to address uncertainties surrounding Ubisoft's future, especially after facing financial struggles and delays in key game releases [3] - The focus on building game ecosystems suggests a strategic shift towards long-term sustainability and growth in the gaming market [2][3]

Core Viewpoint - Tencent is investing $1.25 billion in Ubisoft for a 25% stake in a new subsidiary, enhancing its influence in the gaming industry [1][6]. Company Overview - Tencent is a dominant player in China with its "super-app" WeChat, which integrates chat, social functions, and digital wallet capabilities [1]. - The company has a significant presence in video gaming, cloud services, and content streaming, with its game "Honor of Kings" having over 100 million players [2]. - Despite facing profitability challenges due to strict gaming regulations for children in China, Tencent's earnings surged in the last quarter of 2024, driven by the global AI trend [2]. International Expansion - Tencent has been expanding its international gaming footprint, having acquired a majority stake in Riot Games in 2011 and Supercell in 2016 [4]. - The recent investment in Ubisoft strengthens Tencent's position in the gaming sector, following its initial investment in 2022 [4][6]. Shareholding Structure - Tencent currently holds nearly 10% of Ubisoft's stock, which it cannot exceed before 2030, while the founding Guillemot family owns about 15% [6]. - The new investment will allow Tencent to control 25% of a new Ubisoft unit focused on major franchises like "Assassin's Creed," "Far Cry," and "Tom Clancy's Rainbow Six" [6]. Regulatory Environment - Tencent's products have faced scrutiny from various governments, particularly in the U.S., where it is viewed as a potential national security threat [7]. - The company has been involved in a domestic crackdown that began in 2020, which included an 18-month halt on new video game licenses starting mid-2021 and a $415 million fine in 2023 for regulatory violations [9]. - Although there have been signs of improved relations between Beijing and tech firms recently, restrictions on video game access for minors remain in place [10].

Core Insights - Tencent has invested $1.25 billion in a new Ubisoft subsidiary focused on major franchises like Assassin's Creed, Far Cry, and Tom Clancy's Rainbow Six, marking a significant step in Ubisoft's transformation strategy [1][2][11] - The new subsidiary aims to create evergreen game ecosystems and enhance the quality of narrative experiences, multiplayer offerings, and social features [3][10][22] Financial Overview - The transaction values the new subsidiary at a pre-money enterprise value of approximately €4 billion ($4.3 billion), with an expected average sales multiple of around four times for FY23-FY25E [5] - Tencent's investment of €1.16 billion ($1.25 billion) will secure a minority stake of about 25% in the new subsidiary, which will help strengthen Ubisoft's balance sheet and reduce its net debt [16][21] Strategic Developments - The new subsidiary will be dedicated to the development of the three major franchises and will operate with a dedicated leadership team to streamline operations and enhance creative vision [22][11] - Ubisoft plans to leverage disruptive technologies and focus on nurturing other iconic franchises while continuing to deliver high-quality production and online services [10][11] Governance and Control - The new subsidiary will remain under Ubisoft's exclusive control, with Tencent benefiting from customary minority protection rights and certain consent rights regarding asset disposals [17][23] - The transaction requires a fairness opinion from an independent expert and is expected to be completed before the end of 2025 [21][11]

Group 1 - Ubisoft is postponing the launch of "Assassin's Creed Shadows" and has appointed advisors to review strategic options [1] - The company is creating a new gaming subsidiary with Tencent investing 1.16 billion euros ($1.25 billion) into the unit [1] - The new subsidiary will focus on Ubisoft's major game brands, including Assassin's Creed, Far Cry, and Tom Clancy's Rainbow Six [1] Group 2 - The subsidiary aims to build game ecosystems that are evergreen and multi-platform, enhancing narrative solo experiences and expanding multiplayer offerings [2] - The investment from Tencent values the new subsidiary at 4 billion euros, indicating a 4x multiple based on average sales from 2023 to 2025 [3] - This investment reinforces Ubisoft's balance sheet and supports its goal to become a more agile organization [3] Group 3 - The strategic move follows months of speculation regarding Ubisoft's future and potential external investments [4] - Recent reports indicated that Tencent was in discussions for a possible take-private deal with Ubisoft's founding Guillemot family [4] - The news comes shortly after the release of "Assassin's Creed Shadows," which received positive reviews with an average score of 82 on Metacritic [5]