Rhino crashes into Electronic Boutique after pounds 6m loss

TOM STEVENSON

Deputy City Editor

Rhino Group, the struggling video game retailer, launched its second rights issue of the year yesterday in a cash-raising exercise that could see its largest shareholder gain majority control.

The Electronics Boutique Inc (EBI), already a 25 per cent shareholder in Rhino, could see its shareholding rise to more than 50 per cent thanks to a commitment to underwrite the company's five-for-six cash call.

Rhino's shares closed 1.5p lower yesterday at 11p, compared to the 8p at which the rights are pitched. The effective takeover of Rhino has been sanctioned by the takeover panel, which has said a full bid will not be required even if the US company's stake rises above 29.9 per cent. EBI plans to use Rhino as a launching pad for its European expansion plans.

Both companies operate in the same business, selling video games, PC software and related products. Unlike Rhino, however, EBI has prospered, growing fast since it was founded in 1977 and now generating sales of $295m from its 413 stores in the US and Canada.

Rhino, by contrast, has suffered from a slump in the British market last year as children held back from buying games as they anticipated the launch of new products.

The shares crashed from a high of 65p just before Christmas 1993 to a low of 7p earlier this year as big companies such as Sony slashed prices and retailers such as Our Price and Virgin discounted to match.

The rights issue is part of a new strategic plan which will see Rhino change the name of its Future Zone shops to Electronics Boutique. It will also change its year end to January from December.

Yesterday's cash-call announcement accompanied half year figures showing a pre-tax loss of pounds 6.68m up from pounds 1.57m last time. Turnover in the six months rose slightly from pounds 17.4m to pounds 18m. No dividend is proposed.