GameStop eyes eBay in $56B acquisition move

GameStop has proposed the acquisition of eBay Inc for approximately $56 billion in a cash-and-stock transaction, with Chief Executive Officer Ryan Cohen stating he is prepared to bring the offer directly to shareholders if eBay’s board is not receptive, News.Az reports, citing Reuters.

On Sunday, Cohen said GameStop is offering $125 per share in a deal structured as an equal split between cash and stock.

In a letter addressed to eBay’s board, he noted that based on eBay’s closing price on Friday, the proposal represents a premium of around 20%.

GameStop, once a relatively small player in the stock market before gaining sudden prominence during the meme-stock surge five years ago, is pursuing a target whose market capitalization is nearly four times larger than its own, making the bid highly ambitious.

According to Cohen, GameStop has already accumulated a 5% stake in eBay through a combination of shares and derivatives. The letter was reviewed by Reuters.

The unsolicited takeover proposal was first reported by the Wall Street Journal, which cited an interview with Cohen, who is also GameStop’s largest investor.

Cohen has been seeking to significantly increase GameStop’s market value, aiming for more than a tenfold expansion. In comments to the Journal, he said that combining eBay and GameStop under one corporate structure would unlock substantial opportunities for earnings growth and cost reductions.

“It could be a legit competitor to Amazon,” Cohen said regarding eBay.

In his letter, Cohen stated that GameStop expects to reduce approximately $2 billion in eBay’s annualized costs within 12 months after completion of the deal, which he said would lead to an increase in earnings per share.

He also highlighted that GameStop’s 1,600 retail locations in the United States could serve as a nationwide infrastructure for authentication, product intake, fulfillment, and live commerce services for eBay.

Cohen told the Wall Street Journal he would be willing to initiate a proxy fight if eBay’s board rejects the proposal.

eBay did not immediately respond to Reuters’ requests for comment regarding the offer.

“eBay should be worth — and will be worth — a lot more money,” Cohen said in the interview. “I’m thinking about turning eBay into something worth hundreds of billions of dollars.”

Cohen, often referred to by retail traders as the “meme king” due to his influence during the 2021 meme-stock surge and his strong following among individual investors on social media, has developed a reputation for bold and unconventional strategic moves that can significantly impact markets.

A potential transaction between GameStop and eBay would significantly depart from conventional merger and acquisition practices, as it is uncommon for a company to attempt acquiring a target nearly four times its size. Such transactions typically require substantial debt financing, equity issuance, or a combination of both, with expectations that future earnings from the combined entity will justify the acquisition cost.

Cohen said he has already secured preliminary financial backing, including a commitment letter for approximately $20 billion in debt financing from TD Securities, a subsidiary of TD Bank.

He also noted that GameStop held about $9.4 billion in cash and liquid investments as of January 31, according to his letter, adding that the cash portion of the deal would be funded through these resources as well as third-party equity and debt financing.

According to the Wall Street Journal report, Cohen may also seek additional support from external investors, including sovereign wealth funds from the Middle East.

Cohen further stated that, if the transaction is completed, he would serve as chief executive officer of the combined company.

News.Az 

By Nijat Babayev