Key Takeaways
In a bold Sunday statement, GameStop CEO Ryan Cohen has made an unsolicited acquisition proposal to eBay's board, offering approximately $56 billion to acquire the online marketplace giant.
According to The Wall Street Journal, Cohen stated that his offer for eBay is $125 per share, representing a 20% premium over last Friday's closing price.
Cohen's proposal values eBay shares at $125 each, which is 20% higher than last Friday's closing price. Market participants reacted positively, with GameStop shares rising over 6% in early trading on Monday, while eBay shares also gained more than 8% in pre-market trading.
The financing plan includes a cash and stock combination from GameStop. Cohen revealed that as of January 31, GameStop has approximately $9.4 billion in cash and liquid securities, with the remaining funds to be raised through debt instruments and external capital.
To support this audacious proposal, Cohen has arranged a $20 billion debt financing through TD Securities, the investment banking arm of TD Bank. Additionally, The Wall Street Journal reported that further financing from a Middle Eastern sovereign wealth fund is still under consideration.
Before announcing the acquisition proposal, GameStop had acquired a 5% stake in eBay through direct stock purchases and derivatives.
Cohen Willing to Initiate Hostile Takeover
Cohen indicated that he would not back down easily if the proposal is rejected. In an interview with The Wall Street Journal, he stated he is prepared to bypass eBay's board and present the acquisition proposal directly to eBay's shareholders if the directors refuse to engage in substantive discussions.
If the deal goes through, Cohen confirmed that he intends to serve as CEO of the merged entity.
Cohen's strategic vision includes cutting $2 billion in annual operating expenses within the first twelve months post-merger. He specifically noted that there is significant room for reduction in eBay's sales and marketing expenditures.
"This could become a real competitor to Amazon," Cohen remarked about the potential merged company.
A Deal That Could Nearly Quadruple GameStop's Valuation
Cohen's unconventional approach aligns with his past strategies—he gained national attention during the retail trading frenzy in 2021 and joined GameStop's board in January of that year, later becoming CEO and implementing aggressive cost-cutting measures that restored profitability to the company.
However, GameStop's core business still faces challenges. Last month, the company disclosed a 14% decline in year-over-year revenue for the fourth quarter. The traditional gaming retail sector continues to face ongoing challenges as consumers increasingly shift towards digital distribution.
In contrast, eBay has shown stronger operational momentum. Last week, the company released second-quarter revenue guidance that exceeded analyst expectations, driven by strong performances in collectibles, auto parts, and live auction formats.