eBay rejects Gamestop takeover

Gamestop CEO Ryan Cohen suffers a setback in his attempt to take over the significantly larger trading company eBay. “We have concluded that your proposal is neither credible nor attractive,” replied Chairman of the Board Paul Pressler to Gamestop CEO Cohen’s takeover request in a letter that eBay has publicly shared.

In six points, the eBay board dismisses the idea that a takeover would be financially risky and lead to an uncertain future. The company is well-positioned to continue growing on its own. The proposed management structure of a merged company also does not go down well – Ryan Cohen would be CEO after the takeover.

At the beginning of May, Gamestop made an offer to eBay to acquire the company for 56 billion US dollars plus assumption of existing debt. Since Gamestop, with a current market capitalization of just under nine billion US dollars, is much smaller, the financing is on shaky ground. The company intends to finance the takeover with a loan of 20 billion US dollars and significant share dilution. However, both financing pillars are not yet secured.

In return, eBay investors were promised a purchase price significantly above the current market value. However, advisors also recommended against an agreement due to the risks, Pressler writes.

Further Options

In the next round, Gamestop can either increase its offer, which would be even more financially questionable. Alternatively, Gamestop could initiate a hostile takeover, where the company makes the offer directly to investors. Cohen already declared his readiness for this when the announcement was made at the beginning of May.

Meanwhile, the planned dilution of shares is not tied to the eBay offer. The vote on this could therefore take place independently, possibly to make offers to other companies. Increasing its market capitalization appears to be a high priority for Gamestop.

(mma)