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By | Kelly Fiveash 13th August 2007 11:47

Game shares bounce as competition probe launches

Regulator says deal unfairly squeezes market

Game saw its share price fall by more than 15 per cent last Friday following a watchdog's decision to probe the video game retailer's purchase of Gamestation.

By this morning, however, Game's fortunes had revived after Goldman Sachs recommended the stock to investors, though it revised its target price for the shares, down 0.11p to 219p.

The Office of Fair Trading (OFT) issued a statement on 9 August confirming that it had referred the The Game Group plc's recent £74m acquisition of Game Station Limited in May to the Competition Commission (CC).

Game's shares plummeted following the announcement, closing Friday at 171p from 196.5p on Wednesday.

The UK video game retailer recovered ground this morning with shares currently up around five per cent at 179.61p. In early trading Game had seen a 12 per cent surge in value.

Game bought smaller high street rival Gamestation from movie retail giant Blockbuster earlier this year. Shortly after, the OFT said it would be investigating the deal.

Its decision to refer Game to the CC followed the OFT's conclusion that the merger would nullify competition in the sector.

OFT chief executive John Singleton said: "This merger involves the loss of competition between two parties who, in some segments at least, appear to be each other's closest competitors and in circumstances where we can not confidently rely on new companies entering the market to resolve any issues quickly."

He added that in a market valued at around £1.5bn there was insufficient evidence of competition from other suppliers to step in and "prevent the merged firm from raising prices or cutting back services in a way that would harm consumers".

Game said it was "disappointed" by the OFT's decision and insisted that the buyout of Gamestation would not "substantially lessen competition".

The CC is expected to report its findings by 23 January 2008.

More from the OFT here. ®

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