Rob Fahey
16:25 (BST)
18/04/2005
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GameStop and Electronics Boutique announce merger
Giant merger will secure around 22 per cent of the US market; next stop Europe?
America's largest videogame retail chains, GameStop and Electronics Boutique, have announced their intention to merge in a $1.44 billion deal which will create the world's largest games retailer, with around $4 billion in annual turnover.
Under the terms of the deal, GameStop will acquire all the outstanding shares in Electronics Boutique for $55.18 - a 34 per cent premium over the closing price of its rival on Friday evening.
The merged company, with GameStop as the surviving entity, will have 3,800 stores worldwide, of which 3,200 will be in the United States - representing the largest game retail chain in the world.
However, according to analyst Gary Cooper at Banc of America Securities, the deal should not trouble regulators in America, since the combined company will still only have some 21 to 22 per cent of the overall market.
"[GameStop and Electronics Boutique] will basically dominate the retail market for the hardcore gamer," he noted this afternoon. "However, [the two retailers] combined control only 21 to 22 per cent of the total US video game market, which is about the same as Wal-Mart, the current market share leader."
The industry in Europe will, of course, be watching the moves of the newly-created giant with regard to this market with great interest. Both firms have recently restated their intentions to expand in Europe, with Electronics Boutique targeting the continent with a major store-opening programme, while GameStop intends to open 35 stores in the UK this year.
Only a few weeks ago, leading UK retailer GAME - which is also the largest specialist videogames retail chain in Europe as a whole - informed the London Stock Exchange that it was in preliminary discussions regarding a possible sale of the company, but this afternoon it has confirmed that these discussions have now ended. The identity of the potential suitor was not revealed.
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