GameStop offers $56 billion to buy eBay. Here's what to know
GameStop, a chain of video game stores, has offered to buy e-commerce company eBay for $55.5 billion, trumpeting the move as a bold effort to compete with Amazon and other consumer giants.
The move marks yet another twist in the unlikely emergence of GameStop, which rose to prominence as a popular stock among online traders in 2021.
The offer amounts to $125 per share for eBay, made up of 50% cash and 50% stock, GameStop said on Sunday. That price stands 46% higher than eBay's closing price on Feb. 4, when GameStop started to take a 5% stake in the online shopping firm.
On Monday, eBay confirmed that it had received GameStop's offer.
"The Board will review this proposal with a focus on the value to be delivered to eBay shareholders," eBay said in a statement.
Here's what to know about GameStop's offer to buy eBay:
Why is GameStop trying to acquire eBay?
GameStop, which operates about 1,600 stores nationwide, has faced difficulty in recent years as video game buyers have shifted to online purchases.
The company, meanwhile, says it is well positioned to slash costs and improve efficiency at eBay. GameStop proposed $2 billion in cuts within one year of the merger, targeting product development and administration, as well as sales and marketing.
"More spend is not producing more users on a marketplace with near-universal brand recognition," GameStop said in a statement, touting potential marketing cuts.
GameStop also said its brick-and-mortar stores would enhance eBay's offerings.
The stores, GameStop said, "give eBay a national network for authentication, intake, fulfillment, and live commerce."
The merger could turn eBay into a rival of e-commerce behemoths, GameStop CEO Ryan Cohen said.
"It could be a legit competitor to Amazon," Cohen told the Wall Street Journal.
How will GameStop find money for the acquisition of a much bigger company?
GameStop's attempted acquisition of eBay is an ambitious move by a much smaller firm.
As of Monday, the total value of GameStop -- as measured by market capitalization -- amounted to $11.98 billion. eBay, by comparison, is roughly four times larger, registering at $46.2 billion.
GameStop said it could offer $55.5 billion as a mix of 50% cash and 50% stock.
Alongside that announcement, GameStop CEO Ryan Cohen said in a letter that he had secured a "highly-confident letter" from TD Bank contributing $20 billion in debt for the deal.
Still, the combination of the $11.98 billion value of GameStop stock, the $9 billion in cash on Gamestop's books and the possible $20 billion loan remains well short of the offering price.
When asked about the apparent shortfall on CNBC on Monday, Cohen declined to directly address the issue.
"We'll see what happens," he said, before adding: "We have the ability to issue stock in order to get the deal done."
In theory, the company could issue new shares to raise additional funds. But the approach carries drawbacks, since fresh shares would dilute the value of the current stakes retained by shareholders.
What happens next for GameStop's attempted acquisition of eBay?
In a statement, eBay said its shareholders should "take no immediate action" while the company's board reviews the proposal.
"eBay's Board of Directors, in consultation with its financial and legal advisors, will carefully review and consider the unsolicited proposal to determine the course of action that it believes is in the best interests of the company and all eBay shareholders," the company said.
If GameStop were to acquire eBay, the newly formed company would be led by Cohen, he said in a letter.
"I will receive no salary, no cash bonuses, and no golden parachute -- I will be compensated solely based on the performance of the combined company," Cohen wrote.
