Sports Direct International (SDI) has agreed to install Game Digital concessions and gaming facilities in some of its stores, and to provide loans of up to £55 million (€62.4m-$76.6m) to a subsidiary of the gaming retailer.
Game Digital is a British listed company in which Sports Direct International (SDI) holds a stake of 25.75 percent. It operates more than 560 stores across the U.K. and Spain and has formed a large-scale community around its app and loyalty programs. Game explained that the partnership agreement with Sports Direct is meant to expand physical “arenas” under the Belong brand where gamers hook up and compete, for a fee of up to £7 per hour. The deal also covers plans to open concessions of Game or Belong arenas in select Sports Direct locations.
SDI described the deal as an example of building a commercial relationship through its strategic investment approach. As part of the agreement, Sports Direct has acquired a 50 percent interest in the rights of the Belong intellectual property, for a cash consideration of £3.2 million (€3.6m-$4.5m) and a 50 percent share of future profits of Belong and associated venues. The financing agreement comprises a working capital facility of £20 million (€22.7m-$27.9m) and a capital expenditure facility of £35 million (€39.7m-$48.8m).
Game Digital regards the agreement as a way to move from selling physical products to providing gaming experiences, which helps to fend off competition from online retailers and developers directly selling their games to players. The company launched the Belong brand a year ago and has already opened 19 arenas. Each of them forms a community of players who take part in activities such as Arena Clash, Belong's own E-sports tournament. They provide dedicated spaces for PC and console games to play with friends, to compete and take part in events such as technology launches.
Sports Direct's loan to Game Digital comes after a sharp rise in the company's debt last year, and the retailer announced that it intended to start a new share buyback of up to £100 million (€113.4m-$139.4m), targeting a maximum of 30 million ordinary shares. The buyback program was scheduled to start on Feb. 20 and to cover the period up to and including Sept. 5, which is the date of its annual shareholders' meeting. SDI said the purpose of the program was to reduce the company's share capital.