Online marketplace eBay said Monday it had received an unsolicited takeover bid from video game retailer GameStop, which it will “carefully review.”
But with GameStop worth barely a fifth of eBay, many observers doubt the deal will go through, primarily due to questions over how it would be financed.
GameStop’s proposal, half in stock and half in cash, values eBay at roughly US$55.5 billion – a 20% premium over Friday’s closing price.
eBay said its board and legal teams “will carefully review and consider the unsolicited proposal to determine the course of action that it believes is in the best interests of the company and all eBay shareholders.”
The board added that it “will review this proposal with a focus on the value to be delivered to eBay shareholders, including the value of the GameStop stock consideration and the ability of GameStop to deliver a binding, actionable proposal.”
GameStop, well known among American gamers and retail investors, has roughly US$9.4 billion in available assets and a commitment letter from Canadian investment firm TD Securities for US$20 billion in financing.
But even adding the full value of GameStop shares, the total would only reach about US$40 billion at current valuations.
GameStop CEO Ryan Cohen told CNBC “we have the ability to issue stock to get the deal done.”
But to raise enough money, GameStop would have to create more than double the pool of existing shares, cutting their value by more than half.
“We give the deal a relatively low probability of success,” Baird analyst Colin Sebastian wrote in a Monday note.
Market reaction reflected that skepticism.
eBay’s stock price rose after the bid was announced – but not nearly as much as it should have if investors believed the deal would actually go through.
GameStop is offering US$125 per share, but eBay was trading at US$109.14 in late morning trade on Monday on Wall Street.
Cohen said “eBay has the second largest commerce franchise and there is a big opportunity to do something larger” with the platform, which trails only Amazon among US e-commerce marketplaces.
