Rival wins Game in pounds 99m takeover
Tuesday 13 April 1999
Executives revealed that the agreed cash-and-paper deal was struck at the behest of Game's shareholders, who were dissatisfied with an apparent fall in sales over Christmas - a crucial time in the games business.
Shareholders will be offered 1.0994 new shares in Electronics Boutique plus 41.7p in cash for each share in Game, valuing Game at around 131p. Shares in Game rose 5p to close at 126p, while shares in Electronics Boutique slipped 3p to 81.5p.
The offer represents a premium of 31 per cent over 102.5p, Game's closing price on 23 February - the last business day prior to the announcement by the EB board that it was in talks that might lead to an offer.
Neil Taylor, chairman of Game and one of two founders of the group, will step down and is likely to sell 70 per cent of his stake in the group for a total of more than pounds 15m. Paul Lloyd-Roach, chief executive, and Nick Warran-Smith, finance director, have agreed to stay on.
John Steinbrecher, the chief executive of Electronics Boutique, yesterday said he would keep Game as a separate brand and insisted there would be "few, if any" job losses. None of the 182 stores at EB, or the 86 owned by Game, would close.
Executives insisted there would still be substantial cost savings through eliminating duplication in head offices and cutting distribution costs. "We feel there's a value with the two brands and we'll take every effort to keep the two brands separate," Mr Steinbrecher said.
He said EB and Game had two different types of customer. "Game stores have a lot of video screens and music playing and tend to be in darker colours, and we think that attracts more of the HMV/Virgin type of customer, as opposed to EB which attracts more the Dixons or Woolworths type of customer."
Mr Taylor said the market had over-reacted to a quirk in like-for-like sales figures caused by Game opening more stores than expected. Instead of showing a 3.9 per cent sales fall, it should have showed a 4.2 per cent rise. "It was an over-reaction, but there wasn't enough shareholder support for that view," he said.
EB has received undertakings from the directors of Game and other shareholders in respect of 45.1 per cent of the company's share capital. Game floated only last summer at 200p a share.
Along with the offer, EB announced its preliminary results for the year to 31 January. It reported pretax profits up by 91.7 per cent to pounds 15.3m. Turnover jumped 28.2 per cent to pounds 159.4m, while like-for-like sales increased 10.7 per cent. The board proposed a final dividend of 0.92p, making a total of 1.1p for the year.
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