GameStop has made an attempt to buy eBay in a deal valued at about $56 billion. GameStop CEO Ryan Cohen sent a letter to eBay’s board on Sunday and offered $125 per share in a deal split evenly between cash and stock.
The offer values eBay at a premium of roughly 20% compared with the company’s closing price on Friday. eBay closed on Friday with a market capitalization of about $46 billion, while GameStop stood near $12 billion, reported The Wall Street Jounal.
Cohen told WSJ that GameStop already owns about 5% of eBay through shares and derivatives. He also said the company secured financial backing for the deal, including a commitment letter for around $20 billion in debt financing from TD Securities, a unit of TD Bank.
Why does GameStop want eBay?
Cohen said combining GameStop’s physical retail network with eBay’s online marketplace could create a stronger competitor to Amazon. He said the merged company could improve profits, reduce costs, and expand services tied to collectibles, gaming products, electronics, and live online commerce.
GameStop operates around 1,600 stores across the United States. Cohen said those locations could help eBay build a nationwide network for authentication services, product intake, shipping, and order fulfillment. He also wants to use the stores for live-commerce operations and faster delivery systems.
In his letter, Cohen claimed the combined business could cut about $2 billion in annual costs within a year after the deal closes. He argued that those savings would sharply improve earnings.
Cohen also made clear that he would not quietly walk away if eBay’s board rejects the offer. He told the Wall Street Journal that he is prepared to take the bid directly to shareholders through a proxy fight.
“eBay should be worth — and will be worth — a lot more money,” Cohen said in the interview to WSJ. He added that he sees the potential to turn eBay into a company worth hundreds of billions of dollars in the future.
Under Cohen’s proposal, he would lead the merged company as chief executive after the acquisition closes.
Can GameStop pull off this deal?
The proposed takeover faces major financial and strategic questions because deals of this size rarely happen between companies with such different valuations. Analysts often view these transactions as risky because the smaller company usually needs large amounts of debt, stock issuance, or outside investment to complete the purchase, reported The Wall Street Journal.
Cohen said GameStop plans to use its own cash reserves along with third-party debt and equity financing for the transaction. According to his letter, GameStop held about $9.4 billion in cash and liquid investments as of January 31. Reports also suggest Cohen may seek backing from sovereign wealth funds in the Middle East.
The deal attempt adds another chapter to Cohen’s career, which gained global attention during the 2021 meme-stock frenzy. Retail investors rallied behind GameStop shares at that time and pushed the stock up more than 1,700% during a massive short squeeze that shook hedge funds and Wall Street traders.
Cohen joined GameStop’s board in early 2021 when the company faced declining sales and a rapid shift toward digital gaming and online shopping. He later became CEO and pushed aggressive cost-cutting efforts that helped the company return to profitability.
Even so, GameStop still struggles with major changes in the gaming industry. The company reported a 14% drop in fourth-quarter revenue last month as consumers increasingly buy games digitally instead of visiting stores.
eBay, meanwhile, has shown steadier performance. Founded in 1995 by entrepreneur Pierre Omidyar, the company recently forecast second-quarter revenue above Wall Street estimates. Growth in collectibles, vehicle accessories, and live-streamed auctions helped support its business.
Shares of both companies have risen this year. GameStop stock has gained over 32%, while eBay shares are up nearly 20%.