GAME takeover rumours resurface

The Royal Bank of Scotland has relit the touchpaper on the long-running rumour of US retail giant GameStop’s interest in acquiring The GAME Group.

The rumination came in an RBS note to analysts today, in which it also allayed fears that Morrisons’ ‘crazy’ prices drops on games this week will have a serious effect on GAME’s trading.

It read: ‘Game Group’s shares were hit hard, following Morrisons’ decision to launch a one-off promotion on video games this week, offering top 20 chart titles at half price.

Clearly, this brought back unhappy memories of the Argos price promotions of 2002, which resulted in Dixons following suit, significantly hitting Game Group’s like-for-likes and margins.

‘However, there are significant differences. Morrisons has a 0% share of the games market, so a one week promotion is in itself going to be immaterial for Game (its market share this week would still probably be less than 1%). No other supermarkets or retailers have followed suit.

‘And Morrisons’ stocks and range are extremely limited. There has been no impact on Game thus far, and given its significant preowned trade, it is more insulated from price discounting elsewhere. Assuming no follow-through from other retailers, we would not expect any impact on numbers.

‘Interestingly, GameStop’s chief executive recently stepped down, but he remains as chairman, with responsibility for acquisition opportunities and international expansion – the only two obvious large-scale acquisitions would be Micromania in France, and GAME in the UK (one of the few major international markets in which GameStop is absent). We expect strong results on September 30, which should help rebuild confidence.’

GAME’s share price, which have dipped sharply over the past couple of days, has recovered by 2.75p today to 223.25p.

About MCV Staff

Check Also

Ukie and Barclays have announced a new Mobile Games Growth Programme

Ukie and Barclays have announced the launch of a new business support programme,