Video game retail chain GameStop has made a $55.5bn (£40.9bn) unsolicited offer to buy e-commerce firm eBay.
The cash and stock offer values eBay at $125 a share, $20 more than the shares were valued at when New York trading ended on Friday, GameStop said in a statement on Sunday.
GameStop’s chief executive Ryan Cohen said he is prepared to take the bid directly to shareholders if eBay’s board rejects the approach.
In a letter to eBay, Cohen also said he planned to make $2bn of cost savings at the company within a year of the deal being completed. The BBC has contacted eBay for comment.
Under the proposed deal, Cohen would become the chief executive of the new firm and “receive no salary, no cash bonuses, and no golden parachute” and “be compensated solely based on the performance of the combined company.”
GameStop, which currently has a stock market valuation of around $11.9bn, said it has a commitment letter from TD Securities to provide around $20bn in debt to help finance the deal.
The majority of the proposed cost cuts would be in eBay’s sales and marketing operation, where Cohen said he planned to lower spending by $1.2bn.
Higher spending by that area of the business had not produced more users for the “marketplace with near-universal brand recognition,” GameStop said.
The proposal does not sound like a “terribly good offer” as it would saddle eBay with GameStop’s debt, said retail industry analyst Sucharita Kodali from market research firm Forrester.
It makes sense for GameStop because it could lift its valuation by being linked with a larger company like eBay, she told the BBC.
“The truth is, we are not necessarily putting two strong companies together,” Kodali added.
Shares in eBay jumped by more than 13% in after-hours trading when news of the potential offer emerged on Friday, while GameStop jumped by around 4%.
Though GameStop has closed many of its stores in recent years, it still has around 1,600 outlets in the US.
Those shops would give eBay a national network for its “live commerce” and other business operations, Cohen said.
Cohen, who became the GameStop boss in 2023, has criticised its slow shift into e-commerce.
Launched in 1995 as a marketplace for hobbyists, eBay now has 136 million users.
During the Covid-19 pandemic, GameStop was at the centre of one of the wildest stock market tales in recent years as the investment influencer Keith Gill, known as Roaring Kitty, helped boost its value.
GameStop’s popularity among retail investors during the pandemic helped coin the idea of meme stocks – those that gain attention through sites like Reddit.
Stocks that often became popular were ones that had been heavily bet against by professional investors, such as hedge funds.
As a result some of these shares – which also included cinema chain AMC Entertainment and phonemaker BlackBerry – saw their prices rise and fall sharply in hugely volatile trade.
By BBC New
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