Updates share move, adds context on Tencent deal in paragraph 2, analysts quotes in paragraph 5, 6 and, Assassin's Creed Shadows launch in paragraphs 12-13, graphics

By Johan BODINIER and Alessandro Parodi

March 28 (Reuters) - Ubisoft UBIP.PA shares rose as much as 12% on Friday after it announced plans to set up a subsidiary in which Tencent 0700.HK will invest 1.16 billion euros, as the French video game maker seeks to recover from weak performance in 2024.

In a bid to recover from underperformance by some of the company's main titles, the Guillemot family, Ubisoft's founder and largest shareholder, began exploring talks with the Chinese tech giant in September.

Ubisoft, the creator of Assassin's Creed said on Thursday that the new unit would be valued at around 4 billion euros ($4.32 billion) and will bring together the Assassin's Creed, Far Cry and Tom Clancy's Rainbow Six brands.

It will develop the three franchises and help Ubisoft strengthen its balance sheet, CEO Yves Guillemot said in a statement on Thursday.

Should the deal close by the end of 2025, the group's debt situation will become much more comfortable, Barclays analysts said on Friday.

"Ubisoft gains financial flexibility with the cash infusion, which equates to about two-thirds of the firm's pre-announcement market cap," investment analysis firm Morningstar said in a note.

After climbing around 12% earlier in the session, the Paris-listed stock remained up 8.7% at 14 euros per share at 1059 GMT, for a total market capitalisation of 1.8 billion euros.

"This operation highlights the group's significant undervaluation, which could lead to a slimming down of the rest of its business," broker Midcap Partners said.

Ubisoft lost almost half of its stock market value last year as the company reported results below expectations and warned about dropping sales and delayed game releases.

In February, it said its third quarter net bookings had fallen by 52% year-on-year.

"The Tencent deal is a strategic corrective move for Ubisoft," Erste analysts said in a note.

The video game maker last week launched "Assassin's Creed Shadows," the latest installment of the franchise, in hopes a return to its best-selling series will turn the page on high-profile flops, including "Avatar: Frontiers of Pandora" and "Star Wars Outlaws".

The game was met with positive reviews and promising early sales, leading to an almost 8% jump in its shares on March 24.

($1 = 0.9270 euros)

(Reporting by Johan Bodinier and Alessandro Parodi; editing by David Evans, Jane Merriman and Joe Bavier)

((JohanGeorgesRoger.Bodinier@thomsonreuters.com;))