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GAME declares intention to float on stock exchange

Ben Parfitt
GAME declares intention to float on stock exchange

UK retailer GAME has finally confirmed what has been on the cards for months – it’s going to float itself on the stock exchange.

It will be doing so under the name GAME Digital.

It’s a remarkable change of fortunes for a company that in March 2012 fell into administration, causing it to lose over 300 stores – including the death of Gamestation – and face up to the prospect of extinction.

Just days later however Game Retail rose from the ashes following its acquisition by current majority shareholders Elliott Advisors and partner OpCapita. Two years later the chain has undergone significant restructuring, exceeding all expectations with a very strong finish to 2013.

Indeed, new filings confirm that for the 26 weeks ending January 25th revenues reached £586.4m, up from £427.3m the year before. For the year ending January 25th revenue hit £815.7m.

On top of this the company has also confirmed the agreement of new terms with HSBC for a £50m stock finance facility.

GAME currently has 560 stores across the UK and Spain and claims a 33 per cent share of the new game, hardware and accessories market in the UK and over 16m Reward Card members in the UK and Spain. It also claims to have a 53 per cent market share of retail sales of console digital content (in shops) in 2013 in the UK.

Four new non-executive directors have been hired ahead of the flotation – John Jackson, Caspar Woolley, Lesley Watkins and Franck Tuil.

"GAME has built a strong platform with the continued support of its store and central teams, its supplier partners and its customers,” GAME Digital chief executive Martyn Gibbs said. “The business is now well set to capitalise on the growing market for gaming content, whether digital or physical, new or pre-owned.  A public listing will support our long-term strategy as we develop our digital offering in all our channels.

“GAME's stores, online and mobile channels are an influential and cost-effective route to market for our supplier partners. Gamers can get advice, try new games, trade-in and buy exclusive content with us.  With 16m reward programme members, we are building a valuable community of gamers across the UK and Spain.

“We have had tremendous support from the industry since starting our new company and we now offer our customers significant benefits in terms of their store experience, access to our trained and knowledgeable store teams, access to digital content, and a widening range of products.  As we enter a new era of gaming, with ever more content and ways to buy and play, the business is incredibly well-placed to continue to grow.”

GAME Digital’s non-executive chairman David Hamid added: “The turnaround of the GAME business is remarkable.  GAME in the UK has been transformed and strengthened, while GAME in Spain has proved its resilience.

“The Group now has exciting prospects for the future and I pay tribute to the colleagues within the business who have achieved this.  We have a great team.  The retail landscape is ever-changing and the business has proved it is capable of taking advantage of that pace of change. I look forward in particular to rolling out our ground-breaking digital strategy, which should underpin the business for many years to come.”

Interestingly GAME’s press release concerning the floatation – essentially a sales document designed to appeal to potential shareholders, touts its strong relationship with suppliers. Old GAME’s strained relationships with key publishers played a vital part in its downfall.

“Suppliers view the Group as an important partner in successful launch campaigns, digital sales and bundling and up-selling of their products,” it says.

“Strong supplier relationships mean the Group is regularly provided with market-exclusive content to offer its customers. GAME’s customer insight enables it to respond to specific supplier needs and provides real time market intelligence to assist suppliers with strategic decisions, business planning and customer engagement.”

It also highlights the ease with which it can adapt its store and employee count. In other words, it’s easy for it to hire and fire.

“GAME has a flexible cost structure and capital light balance sheet and the ability to manage its store numbers and staff numbers,” it says. “As of April 26th 2014, the leases for the Group’s stores had an average break clause of 3.1 years in the UK and 1.5 years in Spain, with over 85 per cent. of UK leases on monthly rent.

“Working capital [is] managed effectively, currently with minimal benefit from credit insurance facilities; the Group has no defined benefit pension scheme and, after giving effect to a corporate reorganisation prior to the IPO, will not have long-term borrowings.”

GAME will also offers employees a Share Incentive Plan and Save As You Earn scheme that will see “all employees will be offered free shares up to a maximum of £3,600 under the SIP shortly after Admission, subject to an overall maximum of £1,000,000”.

Added the retailer: “Senior management and selected senior employees will be offered nil-cost options under a new Performance Share Plan. Options granted to Directors will have a longer vesting period and be subject to challenging performance conditions.”

There will also be an offer for a select number of customers.

“At or shortly after Admission, GRL intends to issue virtual loyalty shares with an aggregate value of £2m to certain of its loyal customers,” it said. “It is expected that Loyalty Shares with an aggregate value of £1.8m will be distributed among 18,000 of GAME's existing reward programme customers, and that Loyalty Shares with an aggregate value of £200,000 will be distributed randomly among 2,000 currently active reward programme customers.

“Customers who receive Loyalty Shares will be able to redeem them on certain fixed dates for reward points which they can spend in accordance with the terms and conditions governing GAME's existing reward programme.  The value of the Loyalty Shares will fluctuate broadly in line with the price of the Shares following Admission. The cost of funding this customer reward scheme will be largely funded by the Major Shareholder.”

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Tags: GAME , Retail , float , shares , GAME Retail , floatation , game digital

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