GameStop submits offer to buy the much larger eBay for $55.5 billion
The OG online auction platform gets a big bidder.
Well, CEO Ryan Cohen promised a “genius or totally, totally foolish” acquisition, and now we know what he’s after:
GameStop unveiled a $55.5 billion offer for eBay on Sunday evening, a proposal in which the prospective target’s valuation is more than 4x that of the bidder.
GameStop has already built a 5% economic stake in eBay. The $125-per-share offer marks a 46% premium to the value of the e-commerce platform before the retailer started amassing its position, and about a 20% premium to where eBay closed on Friday.
News of the offer was first reported by The Wall Street Journal. Shares of GameStop rose 4% in postmarket trading on Friday, but are down 3.6% in premarket trading on Monday. eBay is up about 9% as of 6:04 a.m. ET.
Cohen told WSJ that there is no one more qualified than him to run eBay, nodding to his time leading online pet retailer Chewy, and that he’s prepared for a proxy battle to win over shareholders if eBay spurns this proposal.
The video game and collectibles retailer’s offer is a 50-50 mix of cash and shares. About one-third of the cash comes from the liquid assets on GameStop’s balance sheet; beyond that, GameStop say it “has received a highly-confident letter from TD Securities for up to $20 billion.”
During his time leading GameStop, Cohen’s rigorous expense control helped drive a record-setting streak of positive cash flow from operations.
In a press release, GameStop highlighted the potential for $2 billion in savings that could be realized within one year of closing a buy of eBay. More than half of this is attributed to halving sales and marketing spend.
In January, GameStop announced a new pay package for Cohen that would completely tie his financial interests to those of shareholders as well as the firm’s operational performance via hurdles for market cap and cumulative EBITDA. At their peak, the options Cohen could get if all milestones were achieved would have a value of nearly $35 billion.
However, there are some guardrails that may inhibit Cohen from acquiring his way into a massive windfall, though it’s worth noting that these are less formulaic and more discretionary in nature than similar language in Elon Musk’s pay agreement.
The performance hurdles in this proposed package will be adjusted “equitably and proportionately” as determined by the Compensation Committee in the event that GameStop shares are used to complete an acquisition. As of the filing of GameStop’s annual report in late March, Cohen’s proposed pay package remained subject to shareholder approval.
