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Tencent Holdings Ltd is raising its stake in Ubisoft Entertainment SA in a deal that values France’s biggest games developer at about $10-billion, as deep-pocketed Chinese tech majors continue their overseas search for growth.

Interest in Ubisoft comes as the world’s largest games firm by revenue counters slowing growth at home with purchases including 16.25 per cent of Japan’s “Elden Ring” developer FromSoftware announced just a week ago – the same time domestic rival NetEase Inc said it would buy French games maker Quantic Dream.

The latest deal makes Tencent Ubisoft’s single biggest shareholder with an overall stake of 11 per cent, which can be further increased to as much as 17 per cent. It also values the maker of the “Assassin’s Creed” and “Tom Clancy’s” video game franchises at $10-billion, or around €80 per share, well above Tuesday’s stock price closing level of €43.50.

The move also caps a difficult four-year period at Ubisoft, where there has been a succession of new game delays and sexual harassment allegations that led to a revamp of top management. The firm’s share price has dropped in that time from about €100 to less than €44 on Tuesday.

“Tencent is a key shareholder partner for many of the industry’s leaders, who have created some of the most outstanding video games,” said Ubisoft Chief Executive Officer Yves Guillemot. “This transaction reinforces our ability to create strong value over the coming years.”

The transaction also makes Tencent part of a shareholder pact with Ubisoft’s founding Guillemot family. The pact involves Tencent’s acquisition of 49.9 per cent of Guillemot Brothers Limited – the holding company that owns the bulk of the family’s 15 per cent stake in Ubisoft – with 5 per cent voting rights, Ubisoft said in a statement on Tuesday evening.

China’s largest social network and gaming firm, whose investment in Guillemot Brothers amounts to €300-million ($296-million), also has the right to raise its direct stake in Ubisoft to 9.99 per cent from 4.5 per cent currently, according to the statement.

Reuters reported in early August, citing people with direct knowledge of the matter, that Tencent planned to raise its Ubisoft stake with the goal of becoming the single largest shareholder of the French company. Hong Kong-listed Tencent saw its shares close down 1 per cent on Wednesday.

Tencent will not be able to sell its shares for five years, beyond which the Guillemot family will have a pre-emptive right to buy the shares, Ubisoft said. It also said Tencent pledged not to increase its direct stake in the French games maker beyond 9.99 per cent in capital for a period of eight years.

Tencent, which bought its first 5 per cent of Ubisoft for €66 per share in 2018, is also providing the Guillemot’s holding with a long-term loan to refinance its debt, Ubisoft said.

The deal structure does not seem to be a change to the long-standing strategic partnership between the two firms, said Matthew Kanterman, director of research at Ball Metaverse Research Partners.

“Overall it’s a bet by Tencent that Ubisoft can improve its execution and unlock value in its catalogue of intellectual property (IP), the pair can create new mobile games based on that IP and that they can bring existing Ubisoft titles into China once the regulatory climate improves,” he said.

The deal will likely help Tencent offset pressure in its home market where the gaming regulator has not granted any new game licences to Tencent since June last year, analysts said.

Overall revenue in the world’s biggest video game market declined for the first time in January-June, a report showed, as it continued to reel from increasing government oversight.

China began intense scrutiny of its high-growth tech sector around two years ago, in part alarmed by what regulators called “disorderly expansion of capital” caused by acquisition sprees.

Tencent last month reported its first ever quarterly revenue fall, partially hurt by a lack of game approvals and regulations that limit playing time.

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