UPDATE 1-Video game retailer GAME seeks $673 mln valuation in float

Mon May 19, 2014 4:36am EDT

(Adds valuation, details on offer, CEO comment)

By Freya Berry

LONDON May 19 (Reuters) - Video game retailer GAME Digital plans to float its shares on the London Stock Exchange in a listing that two sources familiar with the matter said could value the chain at around 400 million pounds ($673 million).

GAME, which is controlled by U.S. restructuring hedge fund Elliott Advisors via an investment vehicle, said on Monday it would raise net proceeds of around 12 million pounds from the sale of new shares and would target a "free float" of readily tradeable shares of around 35 percent.

That would indicate an offer size of around 140 million pounds in total, in a deal which marks a significant turnaround for the retailer which fell into administration in 2012. Elliott Advisors specializes in firms undergoing restructuring and bankruptcy.

The chain, which has 560 stores and a database of over 19 million customers, also plans to use the offering to raise its profile. It will issue 2 million pounds of "virtual" shares to 18,000 of its loyalty programme members, which gamers can exchange for reward points.

"We're a business based on community. We wanted to make sure we had something in place for both our stores and our most engaged customers," said Chief Executive Martyn Gibbs.

Gibbs added the company has 16 million reward card customers, behind only supermarket group Tesco and drugstore chain Boots.

Faced with stiff competition from online retailers such as Amazon, GAME has sought to differentiate itself in order to compete through increasing its online presence, launching a smartphone app and enabling flexible payment methods.

The chain said 54 percent of new content purchases in the UK were made through methods such as gift cards, reward points and exchanging new games for old, rather than debit or credit cards.

GAME said it had a 33 percent share of the retail video games market in the UK last year. The UK and Spanish video games market were estimated to be worth 4.7 billion pounds in 2013.

Canaccord Genuity is advising the deal, while HSBC and Liberum Capital are joint bookrunners.

($1 = 0.5942 British Pounds) (Editing by David Holmes)