Game Digital rallies on Sports Direct deal

Shares in AIM-listed Game Digital surged on Monday after it announced a collaboration with Sports Direct for the accelerated rollout of its BELONG gaming arena concept and said it has entered into a loan agreement with the company for facilities of up to £55m.

As part of the collaboration agreement, Mike Ashley’s Sports Direct - which purchased a 26% interest in Game last year - has bought a 50% stake in the rights of the BELONG intellectual property for £3.2m in cash and a 50% share of any future profits.

The loan facilities from Sports Direct will be used to fund the venues envisaged under the collaboration agreement, including the costs for new venues and ongoing development of the BELONG website and its related tournament management system.

Game’s chief executive officer Martyn Gibbs said: "I am delighted that through the collaboration agreement we are able to accelerate the implementation of a key element of our transformational strategy to move from a seller of physical products to providing gaming experiences. As more consumer focus and spend moves to experiences, we are well advanced in delivering unique, world class gaming at both local and national level.

"Having launched the BELONG brand just over a year ago, we have now opened 19 arenas and are very encouraged by the popularity and performance of these locations. We look forward to collaborating with Sports Direct to increase the availability and scale of BELONG and to capitalise on the increasing overlap between sports and esports fans by bringing this unique experience to a wider consumer base."

Sport Direct CEO Jon Kempster said: "We are very happy to partner with Game in building an increased presence in the esports market through the BELONG brand. This is a very good example of building a commercial relationship via our strategic investment approach."

BELONG is the group's competitive gaming and esports experience centred around physical 'arenas', which brings casual and competitive gaming to communities nationwide, in city and town centres and in major shopping centres. Each arena houses a 'tribe', creating an emotional identity for players to connect with and represent across a range of competitive and community activities, including Arena Clash, BELONG's own grassroots esports tournament.

Canaccord Genuity said: “That GAME has relinquished 50% of BELONG in order to facilitate the rollout may come as a surprise, but was perhaps the only realistic solution, given the likely capex requirements and pipeline of lease events. The combined effort is, we think, ultimately going to provide greater potential profit upside to GAME than trying to go it alone.

“With no BELONG concessions in Sports Direct, it is too early to put numbers on the opportunity for continued standalone locations as well as any concessions. We expect more detail from the company at interims on 27 March.”

At 1020 GMT, Game shares were up 8.8% to 41.35, while Sports Direct was up 0.8% to 358.64p.