eBay Rejects GameStop Acquisition Bid, Citing Lack of Credibility and Attractiveness

EBay Rejects $56 Billion Takeover Bid from GameStop Chairman Ryan Cohen

EBay Inc. has rejected a $56 billion takeover offer from GameStop Corp. Chief Executive Officer Ryan Cohen, citing concerns over the financing plan, operational risks, and governance of the company. In a letter to Cohen, eBay Chairman Paul Pressler stated that the unsolicited bid was "neither credible nor attractive." Pressler also mentioned the potential impact of a takeover on eBay's long-term growth and the executive incentives that could be affected.

The rejection sets the stage for a potential proxy fight to replace eBay's board with one more favorable to a deal. Cohen had previously stated that he was prepared to take his plan directly to shareholders if the board turned down his offer. The company's shares fell approximately 4% in premarket trading on Tuesday, while eBay's stock dropped about 1%.

Cohen's offer, which was made last week, consisted of $125 per share, split evenly between cash and GameStop stock. This represented a 20% premium to the stock price at the close of the previous Friday. However, Cohen's plan has been met with skepticism from investors, with GameStop's market value standing at approximately $10 billion, less than a fourth of eBay's market value.

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Comparison of eBay and GameStop's Financials

Cohen's plan involves borrowing $20 billion to finance the acquisition, with the aim of finding $2 billion in cost savings within 12 months of the deal closing. He has also pledged to take over a combined entity, with his compensation tied to the performance of the company. GameStop operates approximately 2,200 retail stores in the US, France, and Australia, with the majority of its revenue coming from the sale of gaming hardware and collectibles.

The proposed takeover also involves a potential partnership between eBay and GameStop, with Cohen suggesting that GameStop's 1,600 US stores could be used to authenticate collectibles sold on eBay, as well as serve as shipping centers for goods sold on the e-commerce platform. However, the details of this partnership remain unclear.

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