Nintendo NEVER fully owned Rare, they invested in 49% of the company making it a second party developer. Nintendo was offered to buy out Rare but wasn't interested so Rare founders Chris and Tim Stamper sold their 51% share to Microsoft before leaving the company along with many others. Nintendo eventually sold their share to Microsoft... It would have been silly for 2 competing companies to own parts of the same developer.
Nintendo kept their franshises (Donkey Kong & Star Fox) and Microsoft got all the rest
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