GameStop Seeks to Buy eBay for $55.5B

GameStop (Grapevine, Texas) has launched an unsolicited, $55.5 billion bid to buy online auction house eBay (San Jose, Calif.)

GameStop announced its bid on a Sunday evening (May 3); eBay acknowledged receipt of the proposal the following day, prior to the stock market opening, and said its board would review the proposal while also urging shareholders to take no action at this time.

GameStop’s proposal said it would deliver “$2 billion of annualized cost reductions within 12 months of closing… Beyond cost, GameStop’s 1600 U.S. retail locations give eBay a national network for authentication, intake, fulfillment and live commerce.” It also said GameStop CEO Ryan Cohen would assume the same title of the combined company.

GameStop’s offer is for $125 per share in cash and stock; that number represents a 46% premium to eBay’s unaffected closing price on Feb. 4, the day GameStop started accumulating a position in eBay. GameStop has built a 5% stake in eBay through derivatives and beneficial ownership of common stock. The acquisition would require regulatory approval and a positive vote by eBay shareholders.

The proposed deal was greeted with skepticism by many in the financial community, related to concerns over whether GameStop can finance the deal and run an enterprise roughly four times its current size. In an interview on CNBC, Cohn pushed back hard on such concerns.

“Didn’t you guys call for GameStop’s demise multiple times? Like, it should have been bankrupt by now?” Cohn said. “Look at our financial performance. Is it better than you guys anticipated? Because you guys said it was going to be doing really, really poorly, and it’s actually doing okay.”