Exclusive: GameStop in talks with buyout firms after drawing interest - sources

(Reuters) - Video game and electronics retailer GameStop Corp is holding talks with private equity firms about a potential transaction after receiving buyout interest, people familiar with the matter said on Monday.

Like most brick-and-mortar retailers, GameStop has suffered from heightened competition from online companies including Amazon Inc. Games retailers have also had to cope with a decline in physical video game sales, although GameStop has partly weathered these declines by expanding into used video games and devices as well as digital products.

Shares of the Grapevine, Texas-based company rose as much as 11 percent to $15.50 on Monday on news of the interest, having been up 2.5 percent earlier in the day. The stock was up 9 percent in late afternoon.

The company has hired a financial adviser to assist in these discussions, said the people, who asked not to be named because the matter is private.

Sycamore Partners is one of the private equity firms that has expressed interest in GameStop, one of the people said.

There is no guarantee the talks will result in GameStop deciding to sell itself, the people cautioned.

GameStop and Sycamore declined to comment.

In May, GameStop Chief Executive Officer Michael Mauler departed his post after only three months on the job. The video game retailer said Mauler’s sudden departure was for personal reasons. In June, the company tapped former Microsoft Xbox executive and board director Shane Kim as interim CEO.

The retailer’s stock has slid more than 32 percent over the last 12 months, bringing its market capitalization to $1.42 billion, down from about $9.4 billion in 2007.

While its used-game niche has helped the company, this model has also been challenged as games developers including Electronic Arts Inc, Sony Corp and Microsoft Corp have each launched plans to offer monthly streaming services for many of the older titles they own.

GameStop said in May it had received a letter from a shareholder, hedge fund Tiger Management LLC, and that it values input from its investors. CNBC reported that the letter from Tiger called for changes at the company and a strategic review.

Reporting by Pamela Barbaglia in London and Joshua Franklin in Boston; Additional reporting by Greg Roumeliotis and Harry Brumpton in New York; Editing by Matthew Lewis