NEW YORK – GameStop is proposing to buy eBay for about US$56 billion (S$71.3 billion) in cash and stock, a bold attempt by Ryan Cohen to take over a storied e-commerce name several times larger.
The gaming retail chain offered US$125 per share in cash and stock for the online retailer, or about a 20 per cent premium to its close on May 1.
GameStop, which has built a roughly 5 pet cent stake in eBay, said it’s secured a commitment from TD Bank to provide about US$20 billion of debt financing to help bankroll the deal. In a letter to investors on May 3, Mr Cohen’s company pledged to find some US$2 billion of annual savings within 12 months of a deal closing.
The takeover bid caps the surprising ascent of GameStop, a chain of video game outlets that has shrunk its brick-and-mortar footprint as gamers increasingly purchase software in digital stores. In 2021, it became the centre of a retail-investor frenzy. Michael Burry, the Scion Asset Management head who rose to prominence after a winning wager against mortgages ahead of the 2008 financial crisis, fuelled GameStop’s rally by taking a bullish stance on the firm around 2019.
Mr Cohen is now proposing to take over a company roughly four times larger than the retail chain he operates. GameStop had a market value of US$12 billion as of May 1. EBay was much larger at around US$46 billion, though the game retailer has about US$9 billion in cash.
Mr Cohen earlier told the Wall Street Journal that he’s prepared for a proxy fight and will take the offer to shareholders if necessary.
The proposal comes as GameStop grapples with disruptions from a shift toward online shopping and digital purchases from its brick-and-mortar roots. The company reported a 14 per cent decline in fourth-quarter revenue in April.
In contrast, eBay is showing operational momentum and just last week forecast second-quarter revenue above Wall Street estimates, betting on listings of collectibles and motor accessories as well as live-streamed auctions on its platform.
“EBay should be worth – and will be worth – a lot more money,” Mr Cohen told the WSJ. “I’m thinking about turning eBay into something worth hundreds of billions of dollars.”
Mr Cohen has set ambitious goals for himself. In January, the company unveiled a compensation package that would reward him with options on over 171 million shares if he lifted GameStop’s market value to US$100 billion. In the statement on May 3, Mr Cohen said he would take over a combined entity but get paid solely based on the performance of that firm.
“Though the companies overlap in collectibles and resale, we see low probability of a deal,” Bloomberg Intelligence analysts Poonam Goyal and Sydney Goodman said in a note on May 1. “Any credible offer would require substantial dilution and introduce meaningful execution risk.” BLOOMBERG, REUTERS
