Video game retailer Game Digital plans to float its shares on the London Stock Exchange in a listing that two sources familiar with the matter said could value the chain at around £400 million.

Game, which is controlled by US restructuring hedge fund Elliott Advisors via an investment vehicle, said it would raise net proceeds of around £12 million from the sale of new shares and would target a “free float” of readily tradeable shares of around 35 per cent.

That would indicate an offer size of around £140 million in total, in a deal which marks a significant turnaround for the retailer which fell into administration in 2012. Elliott Advisors specialisses in firms undergoing restructuring and bankruptcy.

The chain, which has 560 stores and a database of over 19 million customers, also plans to use the offering to raise its profile. It will issue £2 million of “virtual” shares to 18,000 of its loyalty programme members, which gamers can exchange for reward points.

“We’re a business based on community. We wanted to make sure we had something in place for both our stores and our most engaged customers,” said chief executive Martyn Gibbs.

Mr Gibbs added the company has 16 million reward card customers, behind only supermarket group Tesco and drugstore chain Boots.

Faced with stiff competition from online retailers such as Amazon, Game has sought to differentiate itself in order to compete through increasing its online presence, launching a smartphone app and enabling flexible payment methods.

The chain said 54 per cent of new content purchases in the UK were made through methods such as gift cards, reward points and exchanging new games for old, rather than debit or credit cards.

Game said it had a 33 per cent share of the retail video games market in the UK last year. The UK and Spanish video games market were estimated to be worth £4.7 billion in 2013.

Canaccord Genuity is advising the deal, while HSBC and Liberum Capital are joint bookrunners. (Reuters)