Game Retail, the video game chain that went bust two years ago, has said it plans to list on the London Stock Exchange within the next four weeks with an expected £400m valuation, reports The Telegraph.
The company will follow the move by Saga to reintroduce “loyalty shares” to London listings. Game said that 18,000 of its 16m existing reward programme customers will receive £100 each of virtual shares under plans to distribute £1.8m to loyal customers in the initial public offering (IPO). A further £2,000 will be distributed “randomly” to other reward customers who sign up within the next two weeks.
Game’s chief executive, Martyn Gibbs, explained that the loyalty shares could be used twice a year to pay towards two video games, although the value of the virtual shares would be pegged to the stock market value.
Game’s employees will also be offered free shares worth a maximum of £3,600 as part of a staff incentive plan .The company’s management will also be allocated a 4pc stake in the business after flotation which will result in a 35pc free float.
The flotation will mark a swift turnaround of a business that was crippled by an overzealous expansion plan. Under the new ownership, the company has shrunk its operations by closing 600 stores and moving out of Australia, Portugal, Scandinavia, France, Portugal and Eastern Europe to focus on the UK and France.
Despite shutting 300 stores in the UK it continues to have own a 33pc share of the video game market.
“This is really a story about the rebirth of a brand rather than the IPO process itself. It is certainly an impressive turnaround given its previous travails. If the IPO is successful it will show that the market is prepared to take a fresh look at certain businesses where there is tangible evidence that structural and systemic issues which led to the earlier failures have been fully addressed”, Alex Tamlyn, partner at DLA Piper.
Game is 99pc owned by Elliott Advisors, who bought the company out of administration for around £50m, advised by former Comet boss Henry Jackson’s OpCapita investment firm. OpCapita owns an economic interest in the company that is roughly equal to a 1pc equity stake.
Last year it was revealed that Game paid private investment firm OpCapita and its backers £3.2m in interest and “monitoring fees” in the first four months under new ownership. However, Benedict Smith, Game’s chief financial officer, said these interest payments never left the group’s holding company and will go towards the company’s working capital.
The business is still in the process of fighting a Court of Appeal defeat with landlords over unpaid rent during its administration. Game said that it has lodged a permission to appeal with the Supreme Court, but a set £3m has already been agreed with administrators as the maximum burden or win.
Game said it made revenues of £686.4m in the six months to January 25 and adjusted earnings of £50.8m. The group reported adjusted earnings of £47m for 2013, making the flotation value of £400 roughly 10 times. The company will be debt free when it comes to market after a restructuring of the business. However, the company still does not have credit insurance.