Loss-making Game into stealth mode as takeover talk grows

EMBATTLED computer games retailer Game Group remained tight-lipped last night over whether it is seeking a buyer so it can avoid slipping into administration.

The company, which employs some 10,000 people, declined to comment on weekend reports that investment bank Rothschild had been appointed to sell the firm.

Industry sources have touted GameStop of America as one potential buyer for the chain, which has 600 shops in the United Kingdom.

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Game Group’s quarterly rent bill is due in a fortnight and failure to pay its landlords could push it into administration, jeopardising thousands of jobs and wiping out investors.

Completing a sale of the group in such a short space of time would be difficult.

The retailer’s share price has plummeted from 62p a year ago to just 3.51p on Friday, with a profits warning in November reducing the shares from around 20p to penny-stock status.

Game’s trading difficulties have deepened in recent weeks, despite the firm agreeing revised lending facilities with its banks last month.

But the loan was not enough to reassure suppliers, with Game reportedly losing the rights to sell keenly-awaited fighting game, Street Fighter X Tekken. Last month, the retailer told gamers it would not be selling popular sci-fi game Mass Effect 3, supplied by Electronic Arts.

Reports at the weekend claimed Deloitte has been lined up to handle any insolvency process, which could see Game’s UK operations put through a pre-pack administration in order for some or all of its shops to be sold on quickly.

The company – which has 1,300 stores worldwide trading under the Game and Gamestation brands – suffered a dismal Christmas, with like-for-like sales down 12.9 per cent in the eight weeks to 7 January, blamed on a lack of new consoles and a squeeze in consumer spending.

Game – which is led by chief executive Ian Shepherd and chairman Christopher Bell – has already signalled that losses for the year to the end of January will be around £18 million.

If Game Group was to fall into administration then it would join an ever-growing list of retailers that have struggled to make it through the economic downturn, with consumers keeping a very tight rein on their spending.

High street icon Woolworths and music retailer Zavvi were early casualties during the recession, with lingerie chain La Senza and women’s fashion specialist Peacocks more recently joining the roll-call of failed firms.

Although parts of both La Senza and Peacocks found buyers, names such as Woolworths and Zavvi have completely disappeared from town centres.

• TIGA, the UK video games industry trade body, has renewed its call for tax breaks for the sector ahead of next week’s Budget in the hope that such subsidies will help developers to take on their international rivals.

Following the first meeting last week of the Scottish Parliament’s cross-party computer games group, Tiga chief executive Richard Wilson said that Scotland’s games developers alone contribute £74m to the UK economy.

Wilson added: “If games tax relief was implemented then, over five years in Scotland, the tax credit would generate several hundred highly-skilled jobs, £12m in investment, £11m in tax revenues and £27m in gross domestic product contributions.”