Tencent Looks Abroad to Level Up


Chinese tech giant Tencent is looking to level up its presence overseas as things get tough at home.

Tencent, the world’s biggest videogame company by revenue, has invested around $300 million in the largest shareholder of French videogame maker

Ubisoft.


UBI -14.92%

Tencent would get a 49.9% stake in Guillemot Brothers, controlled by Ubisoft’s founding family, and would provide the holding company a long-term unsecured loan, Ubisoft said.

Tencent already owns a 4.5% stake in Ubisoft, which makes popular game franchises such as Assassin’s Creed and Far Cry. Tencent and Guillemot Brothers, together with the family’s direct shareholding, own around 20% of Ubisoft. They could raise their stakes to 29.9% under the new agreement.

Ubisoft’s shares, however, fell 15% Wednesday, as the deal dashed hopes of a full takeover. Tencent won’t get a board seat and can’t sell its Ubisoft shares for five years. Ubisoft’s shares have halved in value since the end of 2020 as the company was embroiled in sexual-harassment scandals while the releases of some of its major titles were delayed.

For Tencent, this is another move to expand overseas while it faces a tougher regulatory environment and economic slowdown at home. Last week, the company bought a 16% stake in Japan’s FromSoftware, which makes Elden Ring, one of the most acclaimed games released this year.

NetEase,

Tencent’s rival in China, agreed to buy French videogame studio Quantic Dream last week.

Investing in these studios, which make so-called AAA games—big budget titles—could help Tencent beef up its game lineup. Ubisoft said its partnership with Tencent would involve developing mobile games for some of its major franchises while bringing its famous games to China.

Tencent posted its first quarterly revenue drop in its latest quarter since it was listed in Hong Kong in 2004. China has stepped up its regulations on the game sector, especially on young gamers. Tencent and NetEase haven’t received new game approvals—which are required to make money in games—since last year. China’s economic slowdown adds another challenge.

International game sales made up 8% of Tencent’s revenue in its latest quarter, compared with 3% two years earlier, though the growth of international revenue has also slowed in recent quarters. But given the headwinds at home, it makes sense for Tencent to try a different game abroad.

Related Video: China’s Tencent is backing the developers of blockbuster videogames such as “Pokémon Unite” and “League of Legends.” But Beijing’s crackdown on the industry at home, including when minors can play online games, could affect the company’s global videogame empire. Photo composite: Sharon Shi

Write to Jacky Wong at jacky.wong@wsj.com

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