eBay rejects ‘unsolicited’ $55B takeover bid from GameStop
EBay rejected GameStop’s unsolicited takeover proposal, calling it “neither credible nor attractive.” eBay’s board said it weighed factors including eBay’s stand-alone prospects, uncertainty around GameStop’s financing, risks and governance concerns of a combined company, and how those issues would affect long-term growth, profitability, and valuation.
GameStop CEO Ryan Cohen’s plan involved offering $125 per share in a cash-and-stock mix (valued below eBay’s current scale), with GameStop seeking outside equity and debt financing. Analysts were skeptical, and eBay emphasized that it believes its existing strategy and management position the company too deliver lasting growth and long-term shareholder value.
The proposal also would have involved using GameStop’s U.S. retail stores to create a larger network for services like authentication and fulfillment, and Cohen would have led the combined company as CEO.GameStop could still pursue further action, perhaps including a antagonistic bid, though the outcome remains uncertain.
One of the world’s largest online marketplaces, eBay, has rejected a $55.5 billion takeover offer from video game store GameStop.
Paul Pressler, chairman of the board of directors for eBay, on Tuesday said the “unsolicited” bid was “neither credible nor attractive.”
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“We have taken into account such factors as 1) eBay’s standalone prospects, 2) the uncertainty regarding your financing proposal, 3) the impact of your proposal on eBay’s long-term growth and profitability, 4) the leverage, operational risks, and leadership structure of a combined entity, 5) the resulting implications of these factors on valuation, and 6) GameStop’s governance and executive incentives,” Pressler wrote in a letter.
GameStop CEO Ryan Cohen made news last week when he proposed to combine the company with the much more valuable eBay. GameStop has a market capitalization of $10.39 billion, compared to eBay’s $47.82 billion.
Nonetheless, GameStop offered $125 per share in a mix of cash and stock. The struggling retailer planned to secure outside equity and debt financing until the deal was rejected. Wall Street analysts were skeptical about the proposed transaction.
After acknowledging the proposal on May 4, eBay found the deal didn’t make sense for its business, which is not restricted to the gaming space.
“We have sharpened our strategic focus, strengthened execution, enhanced our marketplace and seller experience, and consistently returned capital to shareholders,” Pressler said. “With its differentiated global marketplace and a clear strategy, eBay’s Board is confident that the company, under its current management team, is well-positioned to continue to drive sustainable growth, execute with discipline, and deliver long-term value for our shareholders.”
If the deal went through, GameStop would have lent eBay its 1,600 U.S. retail stores as part of a “national network for authentication, intake, fulfillment, and live commerce.” Also, Cohen would have been the combined entity’s chief executive.
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In a recent CNBC interview, Cohen admitted the company he sought to buy “is not happy with me.”
It remains to be seen whether GameStop mounts a hostile bid, which Cohen indicated was a possibility. He has proposed taking the idea directly to eBay shareholders, a move similar to the one threatened by Paramount Skydance CEO David Ellison before he ultimately outbid Netflix to buy Warner Bros. Discovery.
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