GameStop has stunned markets by proposing a takeover of eBay in a deal it values at $125 a share, a mix of cash and stock that would give the online marketplace a theoretical equity value of about $55.5 billion. The offer, announced by the videogame retailer as a non-binding proposal, would hand eBay shareholders the right to choose between cash and GameStop stock, with the company saying the bid represents a sizeable premium to eBay’s share price before GameStop began building its stake in February. According to GameStop, it has accumulated a 5% economic interest in eBay through a combination of derivatives and share ownership.

The financing plan appears ambitious but not implausible for a company that says it held about $9.4 billion in cash and liquid investments at the end of January. GameStop also said it has received a highly confident letter from TD Securities for up to $20 billion of acquisition financing. Even so, the transaction would still need to clear the usual hurdles, including negotiations over a definitive agreement, regulatory approval and shareholder backing.

The company is pitching the deal as a cost-cutting and operational overhaul. It says it could extract $2 billion in annualised savings within a year of completion, with the bulk coming from lower sales and marketing spending, followed by reductions in product development and overhead. GameStop argues that eBay’s scale and brand recognition mean extra marketing spend has delivered limited user growth, while its own store network could be repurposed as a national footprint for authentication, intake, fulfilment and live commerce.

The proposal also doubles as a further vote of confidence in Ryan Cohen, who would become chief executive of the combined company if the deal goes through. GameStop says Cohen’s tenure has already brought the retailer back to profit, after a sizeable loss in fiscal 2021, while also shrinking overhead and removing legacy debt. Reuters has previously reported that Cohen has been seeking a transformative acquisition, and PC Gamer noted that the move comes against a stark backdrop: GameStop remains far smaller than eBay in revenue, making the bid one of the boldest corporate gambits in the company’s recent history.

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Source: Noah Wire Services