EBay on Tuesday rejected GameStop‘s $56 billion takeover proposal, calling the unsolicited bid “neither credible nor attractive.”
GameStop CEO Ryan Cohen last week unveiled an audacious bid for eBay, offering to acquire the online marketplace for $125 per share in a cash-and-stock deal. EBay is much larger than the video game retailer, with a market cap of just over $48 billion, while GameStop’s is roughly $10.3 billion.
“The Board, with the support of its independent advisors, has thoroughly reviewed your proposal and has determined to reject it,” Paul Pressler, the chairman of eBay’s board, wrote in a letter. “We have concluded that your proposal is neither credible nor attractive.”
GameStop didn’t immediately respond to a request for comment.
EBay listed several concerns with GameStop’s offer, including “the uncertainty regarding your financing proposal,” along with operational risks and the debt load that would result from the proposed transaction.
Cohen said GameStop had lined up a $20 billion financing commitment from TD Securities, part of TD Bank, and the company has about $9 billion in cash on hand, but the funding gap remains substantial.
The financing letter, released by eBay on Tuesday and which is not binding, stated that TD’s expression of confidence assumes that the combined company maintains an investment-grade credit profile from at least two of the top three ratings agencies. CNBC previously reported TD’s letter included that key condition.
Moody’s Ratings said last week that the proposed acquisition would be “credit negative” for eBay because of the substantial increase in leverage implied by the deal structure.
Many Wall Street analysts threw cold water on the deal, citing a lack of meaningful synergies between the two companies. Cohen also made an awkward and at times combative appearance on CNBC’s “Squawk Box,” where he offered few details on how he would finance the deal.
“We are offering half cash, half stock, and we have the ability to issue stock in order to get the deal done,” Cohen said. “But the full details of the offer are on our website. We’ll see what happens.”
Cohen said he was prepared to take the offer directly to shareholders if eBay declined to engage.
In his proposal, Cohen pledged to operate eBay “a lot more efficiently,” including trimming headcount and slashing its marketing spend, which he suggested had become bloated under CEO Jamie Iannone without leading to user growth.
He also said GameStop’s 1,600 U.S. retail stores could be used to authenticate and fulfill eBay orders, and serve as hubs for live commerce.
EBay wrote in its letter that it remains confident in its current management team and that its business has “delivered meaningful results” over the past several years.
“We have sharpened our strategic focus, strengthened execution, enhanced our marketplace and seller experience, and consistently returned capital to shareholders,” eBay wrote.
The company, whose shares are up 24% year to date, has been in the middle of a turnaround effort. Under Iannone, eBay has doubled down on so-called “focus categories,” like trading cards, collectibles and used luxury goods, as a way to differentiate itself from larger rivals like Amazon.
— CNBC’s Yun Li contributed reporting to this article.
GameStop and eBay year-to-date stock chart.
