April 6, 2012 4:01 pm

OpCapita chief looks to stabilise Game

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It has been a frantic few weeks for Henry Jackson. The former investment banker and now chief executive of OpCapita says he survived on as little as two hours sleep a night as the private investment firm vied for control of Game Group, the UK video games retailer that collapsed last week.

On Sunday OpCapita announced a deal to acquire Game, taking it out of administration and securing the future of 333 stores and almost 3,200 jobs in the process. Mr Jackson will not disclose any details of the transaction but insists Game has a future on the high street, even given stiff competition from online video game sales.

“I struggle with those who say that high street retail in this sector doesn’t work,” Mr Jackson says, pointing to US video games retailer GameStop as “a very good proxy for what Game can become if properly managed”.

Three new consoles will be launched over the next 18 months to two years. “That will give some tailwinds for the business for the first time in a very long time. We are going into the right part of the cycle,” Mr Jackson says.

Now the task is to stabilise Game after administration, which saw 2,100 jobs cut and 277 stores close.

He says OpCapita would have preferred to acquired the business before it went into administration, describing the actions taken during the process as “draconian”.

Some industry analysts and insiders are sceptical. Their suspicion is that OpCapita will look to make money from withdrawing from Game’s leases and selling its head office.

This is fuelled by OpCapita’s record at MFI. Formerly known as Merchant Equity Partners, it bought the furniture chain in October 2006 and negotiated a £130m dowry. It was put up for sale in the summer of 2008, and was sold at the end of September. MFI later went into administration, under a new owner, in November 2008.

Mr Jackson says no more store closures are planned at Game, although it could look to relocate some shops. The former head of Deutsche Bank’s consumer and retail practice insists it is not OpCapita’s strategy to make money from winding down businesses.

“We are not liquidators. We don’t look at businesses based on realising asset value. What we are about is operational change,” he says.

OpCapita looks for big, underperforming businesses into which it can inject strong management teams. It drafts in retail heavyweights such as John Clare, the former chief executive of Dixons, who has been installed as chairman of electrical retailer Comet, which OpCapita bought from Kesa for a nominal £2.

Mr Jackson points to BUT, the French furniture chain acquired from Kesa for €550m in March 2008, which has achieved average annual sales growth of 7 per cent during the past three years, and makes earnings before interest, tax, depreciation and amortisation of more than €80m.

This was achieved by implementing a series of changes including refreshing products, revamping stores, improving the supply chain and buying in franchises.

“[Some people] think we are cowboys, in the way we are buying businesses, because we are buying businesses that they look at and think ‘that business should not exist’,” Mr Jackson says. “We spend a lot of time trying to make sure we believe the business should exist before we invest in it. Then we protect ourselves and our investors by structuring the transaction in a way that we are extremely unlikely to lose money.”

On the acquisition of Comet, OpCapita negotiated a £50m dowry while Kesa will retain responsibility for Comet’s pension liabilities. However, Comet is cutting about 1,000 jobs.

Mr Jackson says Comet is trading well, adding: “We believe we will have the business back to better than break-even in the first year of ownership.”

He also rejects reports that Comet has quietly put 60 stores – about a quarter of the estate – up for sale.

But Comet is negotiating with landlords and is demanding cheaper rents. It could pull out of locations if these are not forthcoming, although Mr Jackson says it has ruled out large-scale store closures.

One headache is credit insurance for Comet’s suppliers. Mr Jackson says three credit insurers are continuing to provide cover, while three withdrew it before the transaction was completed in February.

This situation is sustainable, he says. But he is working to restore cover, providing credit insurers with significant information on OpCapita’s plans for Comet.

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