E-commerce company eBay has rejected a $56 billion unsolicited takeover offer from GameStop CEO Ryan Cohen, describing the proposal as "neither feasible nor attractive." In response, Cohen stated he would "take all necessary steps" to advance the acquisition but did not disclose specific plans.
In early May, Cohen presented the acquisition plan to eBay's board, offering $125 per share and proposing to serve as the company's CEO post-acquisition. The deal was structured with half cash and half stock, with the cash portion to be drawn from GameStop's $9.4 billion cash reserves. Additionally, TD Securities has provided a non-binding commitment letter, offering up to $20 billion in debt financing for the merged entity, contingent on it achieving an investment-grade credit rating. However, industry analysts have expressed doubts about the feasibility of this condition.
eBay's market size is nearly five times that of GameStop. When questioned about the funding sources, Cohen provided vague responses in recent interviews, further deepening Wall Street's skepticism.
Despite the clear rejection from eBay's board, bankers, investors, lawyers, and industry analysts believe that while Cohen's pursuit of eBay is not entirely impossible, the path forward is exceptionally challenging.
**The Tender Offer Route**
Several bankers, lawyers, and analysts noted that Cohen could bypass eBay's board and initiate a tender offer directly to all shareholders, proposing to purchase shares at a premium. Cohen is a co-founder of the online pet supplies retailer Chewy and previously led GameStop to a turnaround in 2021.
Although tender offers are not a mainstream tactic, they often generate significant market reactions. For instance, Paramount-Skydance previously pressured Warner Bros. Discovery with an all-cash tender offer after the latter had already agreed to sell its business to Netflix. After facing at least six rejections, Paramount eventually succeeded in securing a deal.
To proceed with this approach, GameStop would need to persuade eBay's major institutional shareholders, including Vanguard, BlackRock, and State Street. These three institutions manage some of the world's largest index funds and collectively hold over 22% of eBay's shares, primarily through passive index tracking. Analysts believe these institutions are highly unlikely to support a hostile takeover.
Don Bilson, Head of Event-Driven Research at Gordon Haskett Investment Bank, stated bluntly, "A tender offer simply wouldn't work. No eBay shareholder would accept such a proposal."
Year-to-date, eBay's stock price has risen by 32%, with its current market capitalization standing at approximately $51 billion. The company's first-quarter earnings report was strong, with significant growth in categories such as collectibles and toys driving its performance.
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