Video game retailer GameStop has launched an unexpected takeover attempt of online marketplace eBay, proposing a $56 billion acquisition deal according to a Wall Street Journal report published Sunday.
GameStop Chief Executive Ryan Cohen revealed in an interview that his company has accumulated approximately 5% ownership in eBay and is proposing $125 per share through a combination of cash and stock. This proposal represents roughly a 20% increase over eBay’s Friday closing stock price.
Should eBay reject the acquisition proposal, Cohen indicated he’s willing to launch a proxy battle and present the offer directly to eBay shareholders.
“EBay should be worth – and will be worth – a lot more money,” Cohen stated during his Wall Street Journal interview. “I’m thinking about turning eBay into something worth hundreds of billions of dollars.”
The gaming retailer’s chief executive revealed he has obtained a commitment letter from TD Bank providing approximately $20 billion in debt financing for the potential transaction.
According to sources familiar with the situation, GameStop may pursue additional funding from external investors, potentially including Middle Eastern sovereign wealth funds, to complete the acquisition.
The proposed deal presents an unusual corporate acquisition scenario, with GameStop’s current market valuation at nearly $12 billion attempting to purchase eBay, which holds a market capitalization of roughly $46 billion.
Representatives from TD Bank, GameStop, and eBay have not yet provided responses to requests for comment regarding the proposed transaction.
Such an acquisition would represent an uncommon merger and acquisition strategy, as public companies rarely attempt to acquire targets nearly four times their size. These transactions typically require substantial debt financing, stock offerings, or both, relying on projected future earnings from the combined entity to validate the investment.
The Texas-based GameStop corporation is anticipated to reveal additional details about its acquisition proposal later Sunday, according to the Wall Street Journal report.
