What to do about the Game offer from Sports Direct

Tuesday, Jun 25 2019 by

I am a shareholder in GAME Digital (LON:GMD) and have a question for more experience investors than me.

If I decide to reject the offer, am I prejudicing myself in any way? For instance, if the offer goes ahead and I have rejected it, does that mean my shares will not be sold as part of the takeover and I will be left holding shares which cannot be traded?

Or does my opinion not matter as all small shareholders will get dragged along assuming there is a majority in favour of the takeover?

I'd appreciate understanding where I stand.



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GAME Digital plc is a retailer of video games. The Company operates approximately 580 stores across the United Kingdom and Spain. The Company's segments include UK, Spain, and Events, Esports & Digital. Its UK and Spain segments are engaged in the sale of hardware, software, accessories and digital. Its Events, Esports & Digital businesses include SocialNAT and Ads Reality Limited (Ads Reality). The Company's activities include multichannel retailing and merchandising; supply chain management and distribution; software and technology development; marketing and customer relationship management (CRM); sourcing and procurement from suppliers, as well as range of individual customers; event management and production, and training, development and employee engagement. The Company's subsidiary undertakings include Game Retail Limited, Game Stores Iberia SLU, Multiplay (UK) Limited, Game Esports and Events Limited, and Game Digital Solutions Limited. more »

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Sports Direct International plc is a sporting goods retailer, and it operates a portfolio of sports, fitness, fashion and lifestyle fascias, and brands. The Company's segments include Sports Retail, Brands and Premium Lifestyle. Its Sports Retail segment includes the results of the United Kingdom and international retail network of sports stores along with related Websites. Its Brands segment includes portfolio of various brands, such as Everlast, Lonsdale and Dunlop. Its Premium Lifestyle segment includes the retail businesses, such as Cruise, Flannels and USC. In Sports Retail, it offers a range of sporting apparel, footwear and equipment through SPORTSDIRECT.com. Its Fitness Division comprises over 30 gyms located across the United Kingdom. Its channels include standalone stores and multi-fascia retail spaces, concessions within department stores and online. Across its Sports Retail fascias, it has over 700 stores, and across Premium Lifestyle fascias, it has over 83 stores. more »

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6 Posts on this Thread show/hide all

Gromley 25th Jun 1 of 6

Hi Francis,

I think you know what I would do, but that's by the by - I'll try to answer the question you are actually asking, from my experience, but there are probably better informed views to be had.

In terms of levels of acceptance there are a number of milestones to consider.

  • First would be >50% - which would give SPD overall control of what Game does. Not particularly relevant I think, at the 40%+ already on the scoreboard I would say there is effective control.  In such a circumstance there are regulations that purport to protect the interests of minority shareholders, but whether you put much faith in them is a matter of ,erm, faith.
  • At 75% acceptance the company will be de-listed . If this  threshold is reached before the end of the offer period, you will still have to the opportunity to accept (although, beware  how long it might take your broker to action the request). If this threshold is reached only at the acceptance date, I think (subject to correction by those that know better) there is a small risk that you may have missed the boat and either (i) end up holding shares in a de-listed company or (ii) only been able to sell in the market for a limited time and possibly at a discount to the offer price (there's limited appetite to hold unlisted shares) . It is probably more likely however that there would be a short extension to the offer at this stage as it is the simplest way for the buyer to remove the nuisance of small holders.
  • At 90% SPD can (and have indicated that they will) compulsorily purchase the remaining outstanding shares at the offer price.

So getting down to brass-tacks :

  1. You own shares in a company that is already effectively controlled by SPD, but have until 11th July (less broker delays) to guarantee 30p / share.
  2. If SPD achieve 90% take-up you will be bought out at 30p / share.
  3. "The danger zone" is 75-90% where there is a risk that you end up holding virtually un-tradable shares in an un-listed company with a single majority owner.
  4. A competing bid comes in a better price - with SPD already having effective control this I would deem to be as near to impossible as you can get.

You intimated elsewhere that Odey (and other major shareholders? I haven't followed the story) may hold old and could potentially keep the level below 75% and therefore retain the listing. Maybe these bigger guns would have more power to protect the interests of minority holders than you would individually, but not I would argue to a massive extent. SPD could probably make a reasonable case to move the entire of Games estate under the BELONG banner and/or located in SPD stores, where SPD gets 50% of the profits (but zero risk?) as the Joint Venture partner, before getting a percentage of the remaining profits as a shareholder. The best upside I could see here would be if SPD chose to ultimately make an improved offer to the remaining shareholders, just to remove the irritant - it seems a bit unlikely to me.

I'm obviously not painting an optimistic picture of the outcomes for digging your heels in, simply because I cannot see one. However, I should point out that I could have missed something.

I can certainly understand a feeling of regret about the situation if you feel  [i] that you are being bought out a substantial discount to "true value" (I have some sympathy with that thought, but with how much certainty and over what timescales would that "true value" have been released?) and/or [ii] that you are being bullied into selling at this price (again I have some sympathy with this view - but whatcha gonna do?)

I hope that is of some 'help', but at the same time I am genuinely curious if there was some more optimistic outcome that you are/were hoping for?

PS - I am still a (very and increasingly) minority shareholder of one company that de-listed a good few years ago. This was really just a vanity project on my behalf for personal reasons. The company actually treats me quite well, sending me the full Report and Accounts every year and giving me the opportunity to make a nuisance of myself at the AGM (never yet taken them up on that offer). But as the company makes significant losses each and every year and only stays afloat by printing new shares for the Chairman  I cannot imagine how diluted my shareholding has become.

Not a typical example though as this is a football club in the EFL.

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fwyburd 26th Jun 2 of 6

In reply to post #486691

Many thanks Gromley for your comprehensive reply, it is much appreciated.

Personally I think 30p is too low which is why I was considering rejecting the offer. However I would not want to hold shares in an unlisted company controlled by Mike Ashley.

Running through the alternative scenario, if I accept the offer and larger institutions don't, will that stop the takeover completely or will those who have accepted still have to sell their shares at 30p?

This is clearly not my area of expertise so all thoughts welcome.

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Gromley 26th Jun 3 of 6

In reply to post #486821

He's obliged to buy all of the shares that are offered regardless of how many.

However, I'm not sure if there is an option to offer to accept but change you mind before the closure date. You'd need to check the terms of the offer doc and/or check with broker.

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gregatr0n 5th Jul 4 of 6

Hi Francis,
What did you end up choosing to do?
I'm in a similar boat and questioning acceptance at this under-valued offer price but don't want to be caught holding shares that are un-tradeable.

edit - many thanks also to Gromley for your reply, much appreciated.

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fwyburd 5th Jul 5 of 6

In reply to post #490081

HI Greatron,
I reluctantly took the decision to sell, which may or may not prove to be the right decision but on balance I wasn't prepared to risk what was a sizeable chunk of capital.
Time will tell. The good news is it releases lots of cash into my portfolio; the bad news was I was rather hoping to sell above 40p where the profits would have been very worthwhile.

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hayashi22 5th Jul 6 of 6

I sold mine at 29.9p....the spread has narrowed. Can't see any scenario where you will get more than 30p. Time value of money and all that..................

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