Video game retailer GameStop has made an unsolicited $56 billion bid to acquire e-commerce giant eBay, a company with a market value nearly four times larger than its own. eBay confirmed the offer on Monday, stating there had been no prior discussions with GameStop before receiving the proposal.
GameStop, valued at roughly $12 billion, is attempting to buy the online auction giant in a deal consisting of half cash and half stock. The cash portion is about $9 billion, with GameStop carrying a debt load of $4.2 billion. The company disclosed it has already built a 5% stake in eBay and touted $20 billion in potential debt financing from TD Securities to convince shareholders.
CEO Ryan Cohen argued he could replicate his cost-cutting playbook at GameStop to boost eBay's profitability, while leveraging GameStop's approximately 1,600 US stores as a physical network to make eBay a stronger competitor to Amazon. “We have the ability to issue stock in order to get the deal done,” Cohen told CNBC in an interview.
GameStop claims it will achieve $2 billion in annualized cost cuts within a year of the proposed transaction's closing, citing eBay's $2.4 billion spending on sales and marketing in fiscal 2025 while adding only 1 million net active buyers. Cohen, who owns about 9% of GameStop, would serve as CEO of the combined company and be compensated based on performance.
Morgan Stanley analysts said the market needs more funding details and that an all-stock alternative could be a hard sell given the “fundamentally different” business models of the two companies. eBay earns fees by connecting buyers and sellers online without holding inventory, while GameStop is a traditional retailer that buys goods wholesale and resells through physical stores.
“The Big Short” investor Michael Burry, who holds GameStop shares, called the strategy “pedestrian” and warned it would lead to more debt and shareholder dilution. He said he may sell some or all of his shares by the end of the week. eBay's stock surged 5.4% on the news, while GameStop's shares tumbled 5.1%.
Analysts noted that even if the GameStop bid fails, it could draw interest from other potential acquirers. Cohen, a central figure in the 2021 meme-stock frenzy, has said he is ready to go hostile in his approach to eBay.
Source: www.aljazeera.com