Analyst fears GameStop-Woolworths Deal

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As U.S.-based GameStop tries to access its European footprint, letters out of the U.K. advance the aggregation is searching to possibly access about 400 U.K. Woolworths locations.

But Mike Hickey, analyst with Janco Partners, told Edge on Thursday, "We do not accept GameStop is because accepting Woolworths food as their aboveboard footage per abundance is appreciably beyond than GameStop’s needs."

The average GameStop store is around 1,500 square feet.

Hickey added, "[GameStop] would also likely need to raise considerable capital to do an acquisition, which is not consistent with the health of the current credit markets. Assuming a better functioning credit market, we expect GameStop would prefer to acquire [U.K. specialty retailer] GAME Group."

Woolworths became a possible acquisition target after going into administration last week amidst a poor economy and rising debt.

A GameStop rep did not return request for comment as of press time. However, Neville Kahn, reorganization services partner at Deloitte, which is selling off Woolworths assets, confirmed that a number of undisclosed suitors are at the bargaining table.

"Since being appointed as Administrators on 27 November we have received substantial expressions of interest in both Woolworths Plc and Entertainment UK Ltd (EUK).

"We continue to hold discussions with a number of parties interested in buying Woolworths and EUK as going concerns, including with a number of new parties which have approached us in the last few days. We expect talks to continue into the early part of next week."

The GameStop acquisition report originated at trade mag MCV, which cited a "well-placed source" who said, "GAME frustrated GameStop when it bought GameStation. Bosses at GameStop had pretty much given up on launching a U.K. assault – but now, thanks to Woolies, that door is open again. They’re up against other bidders, but they’ll fight tooth and nail.”

The report said GameStop is interested in acquiring about half of Woolworths' 815 stores.

Wedbush Morgan analyst Michael Pachter affirmed that "[GameStop] could use some exposure to the U.K."

GameStop is well aware of the need to address the burgeoning European market, and has already begun taking steps to increase its market share in the region. This year, the company acquired Micromania, which gave GameStop over 300 stores in France, and 49 Norwegian Free Record shops.