Game Digital disposes of Multiplay Digital, market reacts favourably

Investors have taken to the news Game Digital (LON: GMD), the Group behind retailer GAME, has sold its online game server-hosting business Multiplay Digital for a total of £19m.

Shares jumped in morning trading after the sale to American company Unity Technologies was announced. The disposal is made up of £17.1m in cash paid today and £1.9m held in escrow for 19 months.

Previously made up of two divisions, Digital and Esports & Events, Multiplay was recently divided up so Game could hold on to the Esports & Events division.

Multiplay Digital reported revenues of £4.5m and a loss before tax of £0.8m in its last financial year.

Martyn Gibbs, GAME Digital Chief Executive Officer, said:

"This transaction is a significant strategic step forward for GAME Digital. By divesting Multiplay Digital we simplify the Group and focus management on accelerating development plans to fully capitalise on the strong growth potential in our exciting and growing esports activities, including BELONG. We now look forward to further developing GAME Digital as we seek to combine multichannel retail, events and esports."

Edison said it its note this morning:

"We anticipate that the disposal will not have a material effect on our forecasts... In our valuation we adjust year-end net cash of £42.6m for the immediate cash consideration to indicate that the company is now on an FY18e EV/EBITDA rating of 1.8x."

The Group's share price has experienced a dramatic downfall since its peak of 338p per share in December 2014, slowly falling in price ever since to currently trade at 47p. Net Profits for the Group have varied greatly year to year, and it is expected to turn from a Loss of £12m in FY17 to a Net Profit of almost £8m in FY18.