Sports Direct’s offer for GAME moves a step closer to fruition

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Sports Direct’s £51.88 million offer for GAME has progressed after the gaming retailer’s board said it would recommend it for approval.

Sports Direct has been an investor in GAME since July 2017 and has acquired more shares in the gaming retailer from Marlborough UK Micro-Cap Growth Fund. The acquisition sees Sports Direct become a bigger shareholder in the company with almost 39% of the business. Because of this, Sports Direct was required to make a mandatory cash offer for the remaining GAME Shares not held by Sports Direct.

In February 2018, Sports Direct and GAME entered into a collaboration agreement covering the rollout of BELONG and GAME retail stores, including the entering into of concession agreements regarding the siting of BELONG arenas and/or GAME retail stores in Sports Direct locations.

In a statement to the London Stock Exchange GAME said: “The Board has been considering the merits of the Mandatory Offer and consulting with its major shareholders and advisers, whilst also actively engaging in normal course discussions with Sports Direct and its advisers during this time.

“Whilst the Board is disappointed that Sports Direct decided to issue its offer document unilaterally whilst these discussions were ongoing, the Board has unanimously concluded, following a period of detailed deliberation and having been so advised by Canaccord Genuity Limited (“Canaccord Genuity”), that 30 pence per share represents a fair value for the Group and intends, therefore, to recommend that shareholders accept the Mandatory Offer, as those members of the Board who hold GAME shares intend to do. In providing its advice, Canaccord Genuity has taken into account the commercial assessments of the directors of GAME.

“In coming to this recommendation, the Board has considered the growing size of Sports Direct’s shareholding in the Group and the reliance GAME has on Sports Direct for supporting its future growth prospects (especially the future rollout of BELONG and GAME venues under the collaboration agreement), combined with the ongoing industry headwinds, current negative retail market outlook and the likely elongated current console lifecycle which are expected to impact the future financial performance of the Group.

“The Board acknowledges Sports Direct’s intention to work with the GAME team as part of its ongoing review of the business and to accelerate the evolution of the BELONG business. GAME continues to see significant opportunity with its transformation strategy and rollout of BELONG. The Board is therefore disappointed that it is not able to execute this strategy on a standalone basis.

“Nevertheless, the Board believes that the Mandatory Offer has the potential to deliver a number of strategic benefits to GAME’s business, including the opportunity to benefit from Sports Direct’s increased financial and operating support.”