In a surprise move, officials from UK based international retailer GAME have announced that the company has acquired rival local retailer Gamestation in a £74 million ($148m) deal.
Specialist retailer Gamestation is GAME’s closest rival in the UK and operates 217 stores in total (GAME has 400 in the UK and Eire). As a result of its acquisition by U.S. video rental firm Blockbuster in 2002, the company also operates many concession stores within larger Blockbuster outlets.
Gamestation’s 2006 financial results saw revenues of £203.5 million ($407.2m), with EBITDA (Earnings before interest, taxes, depreciation, and amortization) of £6.5 million ($13.0m) and profit before tax of £2.1 million ($4.2m). The company is calculated to have gross assets of £60.9 million ($121.9m).
The £74 million buyout is debt funded and includes assumed working capital of £7.5 million ($15.0m), plus £0.3 million ($0.6m) for new stores.
GAME will maintain the Gamestation stores as a separate brand focused on more hardcore users, with the existing GAME stores aimed at a wider mainstream audience.
“While we believe Gamestation is positioned for ongoing success, today's announcement underscores our intent to focus on our Blockbuster-branded assets in North America in support of our goal to grow our overall share of the video rental market, both in-store and online," said Blockbuster chairman and CEO John Antioco in a statement.
In his latest notes to investors, Wedbush's Michael Pachter says the sale is "a big positive for Blockbuster, and as a negative for GameStop."
"We view the sale as a negative for GameStop as it eliminates one important opportunity for GameStop to expand into the UK market via acquisition," said Pachter. "Instead of gaining traction in the market through an acquisition of Gamestation, GameStop allowed its key rival in the UK, Game Group, to create a greater barrier to entry in that market."
"We are not optimistic that GameStop will be able to grow a grass roots presence in the UK for at least three years," he concluded, "and view the sale of Gamestation to its key rival as a missed opportunity for GameStop."]