Shares suspended as Game board concedes defeat in survival battle

DIRECTORS have called time at Game Group after admitting that the company’s shares are worthless – making it the UK retail sector’s biggest casualty since the demise of Woolworths in 2008.

The board, led by chairman Christopher Bell and chief executive Ian Shepherd, said yesterday that it would appoint an administrator within ten days. Until that appointment, which is expected to fall to PwC, the videogames retailer will be protected from its creditors.

It will continue to trade as normal as discussions continue with banks and potential buyers. Any last-minute deal will almost certainly result in hundreds of store closures and accompanying job losses. About 600 of Game’s 1,300 retail outlets are in the UK, including 52 stores in Scotland employing about 500 people.

Game has been locked in increasingly desperate talks in recent weeks to stave off collapse, with more than £80 million due to be paid out in rent, wages, VAT and supplier bills in the coming days. It is thought to be about £40m in arrears to its suppliers, some of whom have refused to deliver new games such as Mass Effect 3, Street Fighter X Tekken and Mario Party 9.

Game also has bank debts of more than £100m, led by £45m owed to the taxpayer-backed Royal Bank of Scotland. Others, including Barclays and HSBC, are also thought to be owed tens of millions.

Asking yesterday morning for trading in its shares to be suspended, the group said it had assessed the status of ongoing talks between its banks and a “potential third party provider of finance to the business”. Game added: “The board now considers itself to be unable to assess the business’s financial position and is of the opinion that there is no equity value left in the group.”

Just hours later, the firm conceded that its talks had “not made sufficient progress in the time available to offer a realistic prospect for a solvent solution for the business”. The shares continue to be suspended at just below 2.4p.

Negotiations are thought to centre on a possible rescue deal with private equity firm OpCapita, which recently bought electrical goods retailer Comet. Turnaround fund Hilco and US retailer GameStop are also reportedly among those interested in making an offer.

Matthew McEachran, retail sector analyst at brokerage Singer Capital, said he was cynical about Game’s business proposition.

“If you go into a bigger HMV store, there’s a bit of theatre in the games section,” he said. “If you go into a Game store, they’re just so soulless.”

McEachran added: “Game has a bloated cost base, a weak proposition, a pinch point in the economy, increased competition – it’s death by a thousand cuts.”

The group, Europe’s biggest specialist videogaming chain, is the latest and largest in a number of retail failures in recent months.

Fashion chain Peacocks collapsed in January under debts of £240m, though parts of it were later rescued, with lingerie retailer La Senza and outdoor specialist Blacks Leisure also running into trouble that same month.

D2 Jeans fell into administration towards the end of last year, as did shoe chain Barratts.

A report earlier this week from accountancy giant Deloitte warned that the majority of UK retailers simply have too many stores that can’t all be supported as consumers increasingly shift to online shopping.

Many may have to reduce their property portfolios by up to 40 per cent, Deloitte added.

Once dominant player suffers a massive crash

ONCE a dominant player in its market, Game has seen its earnings collapse from some £100 million just a few years back to an expected full-year, pre-tax loss of about £20m.

Established in 1992, the majority of the company’s 1,300 stores worldwide can be traced back to Game’s former guise as Electronics Boutique. However, the nature of its expansion left it unable to cope with an economic downturn that coincided with rising competition from both supermarkets and online retailers.

The firm’s origins can be traced back to the acquisition of 77 Virgin Games stores by Rhino Group, which rebranded the business as Electronics Boutique in 1995. Electronics Boutique acquired Game in 1998 and added a further 86 branches, but did not rebrand to Game until 2002.

The company stepped up its presence on the high street in 2007 when it bought Gamestation, adding 217 stores that retained the Gamestation brand.

The deal left the company with a bloated estate and a duplicated format, as Game and Gamestation were similar retail models. As a result, Game was heavily exposed as the consumer spending squeeze tightened its grip across the retail sector in the past year, leading to a general decline in sales.

There are about 600 Game and Gamestation stores across the UK. The company – which opened its first European store in Stockholm in 1998 – has a further 700 outlets in Australia, Czech Republic, Denmark, France, Norway, Portugal, Spain and Sweden.