eBay’s Board of Directors has rejected GameStop’s acquisition offer because it’s “neither credible nor attractive,” thus raising the question of how a $12 billion company plans to finance a takeover of a business nearly four times its size.
In a response letter to GameStop, eBay says it has thoroughly reviewed GameStop’s proposal to acquire the company, but has ultimately decided against it.
“We have concluded that your proposal is neither credible nor attractive,” Paul Pressler, Chairman of the Board of Directors at eBay, wrote.
The board is convinced that eBay is a strong and resilient business with very good prospects, as it has delivered good financial 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,” Chairman Pressler states.
Because of these achievements, 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.”
On top of that, eBay has doubts about how GameStop intends to finance its $55.5 billion acquisition proposal. GameStop’s market value is estimated at around $12 billion, while eBay is valued at $46 billion.
Earlier this month, GameStop CEO Ryan Cohen offered to acquire the online marketplace for $125 per share in a cash-and-stock deal. He told the media that GameStop had acquired a $20 billion commitment from TD Bank and around $9.4 billion in cash reserves.
The board also questions the incentives of GameStop’s acquisition proposal, without providing any details.
“Our team remains focused on executing our strategy and driving our business forward in the best interests of the company, our shareholders, our employees, and millions of buyers and sellers around the world,” Pressler concludes eBay’s response letter to GameStop.
As of writing, the video game and consumer electronics franchise hasn’t responded to eBay’s rejection.
GameStop can still acquire eBay, but it would have to do so via a so-called hostile bid. This involves bypassing eBay’s Board of Directors and purchasing shares directly from shareholders. If enough shareholders are willing to sell their eBay shares, GameStop could take control of the company.
When Cohen announced GameStop’s bid, he said that he was willing to take the offer directly to eBay’s shareholders. It remains unclear whether Cohen is willing to put his words into action.
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