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Sports Direct makes ?51.9m offer for Game Digital after upping stake

05 Jun 19

LONDON (ShareCast) - (Sharecast News) - Mike Ashley's Sports Direct has made a mandatory takeover offer of 30p a share for Game Digital after upping its stake in the video games retailer.
Sports Direct said on Wednesday that it has agreed to buy just under 14.9 million Game shares at 30p each from Marlborough UK Micro-Cap Growth Fund. This will take the company's holding in Game from 29.90% to 38.49%, above the 30% mandatory offer threshold set by the Takeover Code.

The takeover offer values Game Digital at around 51.88m and represents a premium of approximately 27.4% to the closing share price of 23.55p on Tuesday. Sports Direct said this was its final offer.

"The retail and gaming sectors are fast moving and currently subject to challenging conditions," it said in a statement.

"Sports Direct does not believe that, as a standalone business, Game is able to weather the pressures that it is facing. Sports Direct believes that the offer, in providing Game with the wider benefit of Sports Direct's operating and other experience and increased support, will secure Game's future and allow it to navigate these pressures whilst contributing to Game's long-term sustainability by escalating the evolution of the Belong business and accelerating the next stage of Game's development."

Sports Direct said it plans to work with the Game management team to develop and review the company's existing strategic programme, with store closures potentially on the cards. The review will cover areas including the location, size and lease terms of Game's sites, its headquarters and distribution centre, its product and services mix, and other key aspects of the business and operations.

"In particular, the review will focus on whether the existing Game sites should be consolidated with others in the Sports Direct group, re-purposed or closed, including by looking to consolidate Game sites into Sports Direct's and open Belong stations and arenas within Sports Direct, House of Fraser or other Sports Direct Group locations, focussing on the customer experience and experiential retail offering."

The sporting goods retailer has been an investor in Game since July 2017, and in February 2018, the two companies entered into a collaboration agreement which saw Sports Direct pay 3.2m for half of its Belong business, which provides gaming arenas. Sports Direct also provided Game with a 35m capital expenditure facility.

At 1405 BST, Game Digital shares were up 23% at 28.86p and Sports Direct shares were up 0.4% at 295.80p.

Helal Miah, investment research analyst at The Share Centre, said: "While the shares of Game Digital today have received a big boost, up in excess of 25% upon the news, it will provide little consolation for longer term holders who have seen more than 90% of their value wiped out since the start of 2015. For Sports Direct, it will be a relatively small acquisition which has had little impact on the share price today.

"Mike Ashley has been burned by focusing on further investments on the high street and the UK retail sector, but we see merits in this proposal as it would helping diversify the business a little, bring in another segment of the retail market into its stores with opportunities for cross selling along with cost synergies."

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Market Data

Currency UK Pounds
Price 503.00p
Change Today 4.80p
52 Week High 518.00p
52 Week Low 214.00p
Volume 386,920
Shares Issued 521.66m
Market Cap 2,623.95m


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