Electronics Boutique tries to cut US links

Click to follow
The Independent Online

Electronics Boutique is seeking to sever its ties with its US parent in a move that could save the British computer games retailer more than £4m next year.

The UK group has asked the High Court to broker a dispute with its eponymous US counterpart that centres on a little-known management services agreement between the two companies.

Under the agreement, which was worth £4m last year, the UK group pays Electronics Boutique Inc 1 per cent of its turnover in return for market information such as which games are selling well in the United States.

Electronics Boutique Plc, which will seek shareholder approval next week to rebrand as Game, said it was trying to end the agreement on the grounds that there had been a change of control at the US business. In the past half year, James Kim, an American businessman, has sold down his family's 100 per cent stake in Electronics Boutique Inc to about 46 per cent.

Martin Long, the deputy chief executive, said: "There is no question the agreement has been of great use, but at current market values is it worth £4m or £5m?" Analysts expect the UK company, which is riding high on a string of high-profile console and games launches, to make £438m in sales this year, rising to £540m in 2003.

The US group's involvement with Electronics Boutique plc dates from 1995, when it came to the rescue of the UK group, then called Rhino. The services agreement is the last link between the two companies following Mr Kim's disposal last October of his 19 per cent stake in the UK group.

Mr Long said his company, which has a 30 per cent share of the UK computer games market, no longer needed the support of its US parent such as access to its accounts and business practices.

"We went through a period of intensive care when the agreement was of great use. This business has grown up a lot and is now a lot stronger," he said.

Electronics Boutique Inc is disputing the legal challenge and no decision is expected from the High Court until the end of the year.

Comments