Prime Highlights
- GameStop has made a $56 billion offer to acquire eBay, showing strong confidence in expanding its digital and resale business.
- The company plans to unlock significant value by combining both platforms and targeting $2 billion in annual savings.
Key Facts
- GameStop offered $125 per share, a premium of about 20% over eBay’s recent closing price.
- The deal includes $20 billion in debt financing support from TD Bank to help fund the acquisition.
Background:
GameStop has proposed buying eBay for roughly $56 billion in cash and stock, a stunning move by the meme stock retailer’s chief executive, Ryan Cohen, to take control of an e-commerce giant nearly four times its size.
The gaming chain offered $125 per share for eBay, representing a 20% premium over the online marketplace’s closing price last Friday. To fund the deal, GameStop secured a $20 billion debt financing commitment from TD Bank. The company also promised investors it would cut approximately $2 billion in annual costs within 12 months of closing.
GameStop currently holds about a 5% stake in eBay. The retailer carries a market value of $12 billion and holds roughly $9 billion in cash. EBay, by comparison, is valued at around $46 billion, making this one of the most ambitious takeover attempts by a smaller company in recent memory.
Cohen told the Wall Street Journal he believes eBay can eventually become a company worth hundreds of billions of dollars. He also confirmed he is prepared to launch a proxy fight and take the offer directly to shareholders if eBay’s board resists.
The bid arrives at an unusual crossroads for both companies. GameStop has been closing many of its physical stores as more gamers buy games online. It is now focusing more on collectibles and trading cards.
eBay has also shifted in a similar way, putting more focus on collectibles and second-hand items, which means both companies now have overlapping business areas.
Cohen’s compensation package, announced in January, would reward him with options on over 171 million shares if GameStop’s market value reaches $100 billion. He said he would lead the combined company and accept pay tied solely to its performance.
