TLDR
- GameStop made an unsolicited, non-binding offer to buy eBay for $125 per share in a 50/50 cash-and-stock deal, valuing eBay at roughly $56 billion.
- The offer represents a 20% premium to eBay’s Friday closing price of $104.07, and eBay stock jumped over 6% in premarket trading Monday.
- GameStop CEO Ryan Cohen said he wants to turn eBay into a serious Amazon competitor and is prepared to run a proxy fight if needed.
- GameStop has built a roughly 5% stake in eBay and secured a $20 billion debt commitment from TD Securities to help fund the deal.
- eBay’s board confirmed it received the offer and is reviewing it, advising shareholders to take no action for now.
GameStop CEO Ryan Cohen dropped a bombshell Sunday evening, announcing an unsolicited, non-binding offer to acquire eBay for $125 per share — a deal that would value the e-commerce platform at roughly $56 billion.
The offer is structured as half cash and half GameStop stock, and comes at a 20% premium to eBay’s closing price of $104.07 on Friday.
eBay stock surged more than 6% in premarket trading on Monday. In after-hours trading Sunday, it had jumped as high as 13.4% to around $118 — still below the offer price, a sign that investors are not fully convinced the deal will go through.
GameStop’s current market cap sits at just under $12 billion, making this a rare case of a much smaller company attempting to swallow a larger one.
Cohen told CNBC Monday morning that he had not spoken with eBay’s management before making the offer public.
“For obvious reasons, eBay is a public company, there’s all kinds of perverse financial incentives from the board to the management team. So there’s only one way to approach something like this,” Cohen said on Squawk Box.
eBay confirmed receiving the offer Monday and said its board of directors would review it. The company advised shareholders to take no action at this time.
How GameStop Plans to Fund It
The financing is one of the biggest question marks hanging over the deal. GameStop has secured a $20 billion debt commitment from TD Securities, and Cohen said the company would also draw on its roughly $9.4 billion cash pile.
The remaining gap could be covered through the issuance of new GameStop stock — something Cohen acknowledged but was vague about in his CNBC interview, directing viewers to GameStop’s website for full details.
GameStop has built approximately a 5% stake in eBay, made up primarily of derivatives and some common stock. Cohen argued that gives eBay’s board a fiduciary duty to seriously consider the proposal.
“This is a business that is under-earning and can make a lot more money,” Cohen said. “GameStop is a good blueprint for that.”
GameStop also said it plans to deliver $2 billion in annualized cost savings within 12 months of closing, accusing eBay of overspending on sales and marketing. Cohen would serve as CEO of the combined entity.
Wall Street’s Reaction
Not everyone is buying it. Bernstein analysts said they were “surprised” by the headline and even more doubtful anything would come of it. “We’re left scratching our heads at this one,” they wrote.
Cohen also warned he is prepared to take the fight directly to eBay’s shareholders via a proxy battle if the board doesn’t engage.
eBay’s board said it would evaluate the proposal with a focus on “the value to be delivered to eBay shareholders, including the value of GameStop stock consideration and GameStop’s ability to deliver a binding, actionable proposal.”
GameStop stock was down about 1% on Monday, trading at $26.30 per share.
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