(Reuters) - Ubisoft shares rose more than 10% on Friday after the French video game maker announced plans to set up a subsidiary in which Tencent ( TCTZF ) will invest 1.16 billion euros.

The creator of Assassin's Creed said on Thursday the new subsidiary 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.

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

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

The Paris-listed stock was up 10.5% to 14.3 euros by 0833 GMT, for a total market capitalisation of 1.9 billion euros.

Brokerage Wedbush said that while carving out a new subsidiary might not increase Ubisoft's enterprise value, its efforts to improve its balance sheet were positive.

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

"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 launched last week "Assassin's Creed Shadows," the latest installment of the franchise.

($1 = 0.9270 euros)