One of the world’s largest online marketplaces, eBay, has rejected a $55.5 billion takeover offer from video game store GameStop.
Paul Pressler, chairman of the board of directors for eBay, on Tuesday said the “unsolicited” bid was “neither credible nor attractive.”
“We have taken into account such factors as 1) eBay’s standalone prospects, 2) the uncertainty regarding your financing proposal, 3) the impact of your proposal on eBay’s long-term growth and profitability, 4) the leverage, operational risks, and leadership structure of a combined entity, 5) the resulting implications of these factors on valuation, and 6) GameStop’s governance and executive incentives,” Pressler wrote in a letter.
GameStop CEO Ryan Cohen made news last week when he proposed to combine the company with the much more valuable eBay. GameStop has a market capitalization of $10.39 billion, compared to eBay’s $47.82 billion.
Nonetheless, GameStop offered $125 per share in a mix of cash and stock. The struggling retailer planned to secure outside equity and debt financing until the deal was rejected. Wall Street analysts were skeptical about the proposed transaction.
After acknowledging the proposal on May 4, eBay found the deal didn’t make sense for its business, which is not restricted to the gaming space.
“We have sharpened our strategic focus, strengthened execution, enhanced our marketplace and seller experience, and consistently returned capital to shareholders,” Pressler said. “With its differentiated global marketplace and a clear strategy, eBay’s Board is confident that the company, under its current management team, is well-positioned to continue to drive sustainable growth, execute with discipline, and deliver long-term value for our shareholders.”
If the deal went through, GameStop would have lent eBay its 1,600 U.S. retail stores as part of a “national network for authentication, intake, fulfillment, and live commerce.” Also, Cohen would have been the combined entity’s chief executive.
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In a recent CNBC interview, Cohen admitted the company he sought to buy “is not happy with me.”
It remains to be seen whether GameStop mounts a hostile bid, which Cohen indicated was a possibility. He has proposed taking the idea directly to eBay shareholders, a move similar to the one threatened by Paramount Skydance CEO David Ellison before he ultimately outbid Netflix to buy Warner Bros. Discovery.