Operator  

Good day, and thank you for standing by. Welcome to the Ubisoft Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Alexandre Enjalbert, Ubisoft's Head of Investor Relations. Please go ahead, sir.

Alexandre Enjalbert  

Thank you. Welcome, everyone, and thank you for joining this call on such short notice. With me today are Yves Guillemot, our CEO; and Frédérick Duguet, our CFO. The purpose of the call this evening is to walk you through today's announced transaction. We will not cover this quarter's performance. With regards to our calendar, our full year earnings call is scheduled on May 14, 2025. Now I'll turn the call over to Yves Guillemot.

Yves Guillemot   Co-Founder, Chairman, CEO, President & Chief Creative Officer

Thank you, Alexandre, and good afternoon. Since the beginning of the year, we have been conducting a comprehensive review of our strategic options to maximize the value of our assets and create the best possible conditions for developing outstanding games in a rapidly evolving market. Today, we are thrilled to announce the creation of a new subsidiary dedicated to 3 of our largest franchises: Assassin's Creed, Far Cry and Tom Clancy's Rainbow Six. This initiative is supported by Tencent, which will invest EUR 1.16 billion for a minority stake into the new subsidiary.

This binding agreement with Tencent is part of a formal and competitive process launched earlier this year. After a careful review of several expression of interest from a diverse group of high-profile parties and in keeping with its responsibility to act in the best interest of all Ubisoft stakeholders, the Board of Directors, upon recommendation from the ad hoc committee determined that this transaction crystallized the best value for Ubisoft's assets and aligns with our strategic objectives. This marks a step change for Ubisoft and is a key milestone as we accelerate the group transformation and lay the foundation for a new operating model.

With Tencent support, this new subsidiary will focus on building game ecosystems designed to become truly evergreen and multi-platforms, bolstered by greater investment and boosting creative capacities, it will drive further increases in quality of narrative solo experiences, expand multiplayer offerings with increased frequency of content release, introduce free-to-play touch points and integrate more social features. Through this transaction, we are crystallizing the best value of our assets, significantly strengthening our balance sheet and enhancing our financial flexibility to support the growth of selected franchises while pursuing our transformation. This initiative is a key component of our broader strategy to evolve and streamline the group's target operating model, enabling us to become a more agile organization.

Beyond the scope of this new business unit, the group will focus on nurturing the development of iconic franchises, including Tom Clancy's Ghost Recon and The Division, accelerating the growth of top-performing titles and leveraging disruptive technologies on selected new IPs while continuing to deliver state-of-the-art production game engines and online services. I will now hand over the call to Frédérick, who will provide you with more details about the transaction with Tencent. Frédérick?

Frédérick Duguet   Chief Finance Officer

Thank you, Yves, and hello, everybody. Let me walk you through some of the key terms of the transaction with Tencent. Under this agreement, the new subsidiary will include teams developing the Tom Clancy's Rainbow Six, Assassin's Creed and Far Cry franchises based in Montreal, Quebec, Sherbrooke, Saguenay, Barcelona and Sofia as well as the back-catalog and any new games currently under development or to be developed. Ubisoft will grant to this new entity a worldwide, exclusive, irrevocable and perpetual license for the intellectual property and related proprietary rights associated with the 3 franchises video games utilization in exchange for a royalty. At closing of the transaction, Tencent will invest a total amount of EUR 1.16 billion for an approximate 25% economic interest, valuing the entity as a pre-money enterprise value of around EUR 4 billion, implying an average fiscal '23 to '25 sales multiple of around 4x.

The proceeds will be used to significantly strengthen the group's balance sheet by reducing its consolidated net debt position, accelerate its transformation and support growth of selected franchises. The new entity will have a dedicated leadership team supervised by the Board of Directors. Conditions precedent to this transaction include the issuance of a fairness opinion by Finexsi acting as independent expert, the completion of the carve-out and the obtention of the necessary regulatory clearances.

Subject to the satisfaction of these conditions precedent, the transaction is expected to be completed by the end of the calendar year. After closing of the transaction, the new business unit headquartered in France will remain exclusively controlled by and consolidated by Ubisoft. Completion of the transaction, as I said, is expected to happen before the end of the year. Let me now hand over to Yves to conclude.

Yves Guillemot   Co-Founder, Chairman, CEO, President & Chief Creative Officer

In conclusion, this partnership with Tencent underscores the strong value of our IP, significantly reinforces Ubisoft's balance sheet and establishes the optimal conditions for the long-term growth and success of these franchises. This also marks the beginning of a new chapter in Ubisoft's journey, characterized by both steps to sharpen our strategic focus. We are committed to building a sharper and more focused organization, one where talented teams will elevate franchises to the next level, accelerate the growth of emerging ones and lead innovation in next-generation technologies and services.

All of this is driven by a single goal: to deliver enriching memorable games that exceed players' expectations and create superior value for our shareholders and other stakeholders. In the coming months, our efforts will be concentrated on shaping this operating model. We will provide more details in due course. We are now happy to take your questions. Thank you.

Operator  

[Operator Instructions] And your question comes from the line of Doug Creutz from TD Cowen.

Douglas Creutz   TD Cowen

Could you just clarify, will these studios in the new entity, will they ultimately be reporting back to Ubisoft senior management? Or is there going to be a whole separate management structure that will be external to Ubisoft that these studios will report to?

Frédérick Duguet   Chief Finance Officer

Yes, Doug. So there will be a dedicated management under the supervision of a Board that will be controlled by Ubisoft. So Ubisoft will continue controlling and consolidating this entity.

Operator  

Your next question comes from the line of Eric Ravary from CIC.

Eric Ravary   CIC Market Solutions (ESN)

Two questions from my side. First one, to clarify, is it a capital increase or disposal of shares to create this subsidiary? So the EUR 1.16 billion put by Tencent will be at the level of the JV or at Ubisoft's level? And second question is on the number of employees that are transferred to the new subsidiary with the 6 studios mentioned.

Frédérick Duguet   Chief Finance Officer

So this is a capital increase at the new level. And in terms of number of employees, it's too early to provide more information. We'll be focusing on the carve-out execution in the coming months, and we'll be working on the target operating model. So that's more to come. What we can say is that it's indeed an acceleration in our transformation, and we'll be streamlining the operating model in the months to come.

Operator  

[Operator Instructions] And your next question comes from the line of Ed Young from Morgan Stanley.

Edward Young   Morgan Stanley

Sorry, if you covered this at the very beginning, I did miss the start of the call, I'm afraid to say. First of all, could you talk a little bit about what the intent is to do with the brands that haven't gone into this entity? Are they just going to carry on? Or should we assume that there is potential for them to be sold? Or how should we think about the prioritization? And then more broadly, could you perhaps touch on what is the relationship going to be from sort of technology sharing, scale, benefits of the 2 entities alongside each other? Or should we think about these on sort of very separate tracks, if you like, from the current portfolio?

Frédérick Duguet   Chief Finance Officer

Yes. So thank you, Ed. So as you mentioned, we'll be pursuing the development and the growth of our other iconic franchises that's got into new groups, including Tom Clancy's, The division and Ghost Recon will be supporting the growth of selected and performing IPs. We'll be also creating a few new IPs. We'll be benefiting from our cutting-edge technologies and emerging technologies. So to your question, yes, technologies will support the development of the new entity and will support the road map of the other franchises.

Operator  

[Operator Instructions] And your next question comes from the line of Aleksander Peterc from Bernstein.

Frédérick Duguet   Chief Finance Officer

Alex, we can't hear you well.

Aleksander Peterc   Sanford C. Bernstein & Co.

Can you hear me now?

Yves Guillemot   Co-Founder, Chairman, CEO, President & Chief Creative Officer

Yes, that's better.

Aleksander Peterc   Sanford C. Bernstein & Co.

Okay. That's better. I'd just like to understand what this carve-out means for current Ubisoft bondholders in terms of their rights on the assets going forward. I'm not sure if that was explained in the press release, but if you could just clarify that for me.

Frédérick Duguet   Chief Finance Officer

Yes, there is no impact for bondholders as we are -- we keep the full control on the assets and we're fully consolidating these assets. We just have a minority noncontrolling investors in part of the asset. So there is no impact.

Aleksander Peterc   Sanford C. Bernstein & Co.

And how should we think of the share of profits going to Tencent as a result of this transaction? Do you have any approximate guidance on that? Are these franchises the bulk of your profitability?

Frédérick Duguet   Chief Finance Officer

So as we said, they will have around 25% of economic interest in the entity. We expect, of course, to grow the value of this entity as we have a strong road map with these 3 big brands, and we are happy to remain very highly exposed to the future value that we get from this entity. So again, the share of Tencent will be around 25% of this entity.

Operator  

There are currently no further questions. I will hand the call back to closing remarks.

Yves Guillemot   Co-Founder, Chairman, CEO, President & Chief Creative Officer

Thank you so much for listening, and I wish you a good day or good evening. Thank you. Bye-bye then.

Operator  

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.