GameStop places a daring $56 billion wager on eBay
GameStop proposed on Sunday to buy eBay Inc. for about $56 billion in a cash-and-stock deal. With CEO Ryan Cohen saying he was prepared to take the offer directly to shareholders if eBay’s board wasn’t receptive.
GameStop—a small-time stock that rose to fame during a meme frenzy five years ago. Is offering to pay $125 per share in a 50-50 mix of cash and stock, Cohen said in a letter to eBay’s board. Based on eBay’s closing price on Friday, the offer represents a premium of about 20%.
Ebay has a market capitalization nearly four times larger than GameStop’s, making the takeover bid an ambitious undertaking.
The US video game retailer has already amassed a 5% stake in eBay through shares and derivatives. Cohen said in the letter, which was seen by Reuters.
His unsolicited offer to buy the US online marketplace was first reported by the Wall Street Journal. Citing an interview with CEO Cohen, who is also GameStop’s largest investor.
Cohen, who is driving the struggling video game retailer’s market value up more than tenfold, told the Journal that bringing eBay and GameStop. Under one roof would create enormous opportunities to improve profits and reduce costs. The US video game retailer has already amassed a 5% stake in eBay through shares and derivatives, Cohen said in the letter.
His unsolicited offer to buy the US online marketplace was first reported by the Wall Street Journal. Citing an interview with CEO Cohen, who is also GameStop’s largest investor.
Cohen, who is driving the struggling video game retailer’s market value up more than tenfold. Told the Journal that bringing eBay and GameStop under one roof would create enormous opportunities to improve profits and reduce costs.
Cohen said in the letter that GameStop would cut $2 billion in eBay’s annualized costs within 12 months of the closing, which would boost the company’s earnings per share.
GameStop’s 1,600 U.S. locations would provide eBay with a nationwide network for authentication, receiving, fulfillment, and live commerce, he added.
Cohen said he has already secured financial commitments, including a letter of commitment for approximately $20 billion in debt from TD Securities, a subsidiary of TD Bank.
GameStop had approximately $9.4 billion in cash and liquid investments as of January 31, Cohen said in his letter, adding that the cash component of the deal would be funded with that money and third-party financing through equity and debt.
He may also seek backing from outside investors, including Middle Eastern sovereign wealth funds, for the transaction.
In the letter, Cohen stated that GameStop will increase the company’s earnings per share by reducing eBay’s annualized expenditures by $2 billion within a year of the transaction.
He noted that eBay would get access to a national network for authentication, receiving, fulfillment, and live commerce thanks to GameStop’s 1,600 U.S. locations.
20 billion in debt secured
According to Cohen, he has already obtained financial pledges, such as a letter of commitment from TD Securities, a division of TD Bank, for about $20 billion in debt.
According to Cohen’s letter, GameStop had around $9.4 billion in cash and liquid investments as of January 31. He also stated that third-party financing through debt and equity will be used to support the cash component of the purchase.
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