GameStop, the US physical games retailer, made bizarre advances on eBay last week – an organisation almost four times its size.
That play has since been rejected by the online auction site, with Paul S. Pressler, the Chairman of the Board of Directors, describing the gaming store’s proposal as “neither credible nor attractive”.
GameStop, which is worth around $12 billion, had proposed an acquisition that would consist of a half-stock, half-cash deal valued at about $125 per eBay share.
Pressler laid out five reasons why eBay believes the $56 billion acquisition is a non-starter, as follows:
- eBay’s standalone prospects
- The uncertainty regarding your financing proposal
- The impact of your proposal on eBay’s long-term growth and profitability
- The leverage, operational risks, and leadership structure of a combined entity
- The resulting implications of these factors on valuation
- GameStop’s governance and executive incentives
Pressler continued:
“eBay is a strong, resilient business that 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. 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.”
Investors have questioned whether GameStop actually has the financial clout to finance the transaction without saddling itself with debt, and that’s been a drag on its share price ever since its intentions were announced.
GameStop believes that it’d be able to benefit from cost reductions if it aligned with eBay, and it’d have a stronger chance of competing against Amazon.
But the market is sceptical, and frankly this all looks like a big publicity stunt to us. If that’s the case, it seems like eBay doesn’t really want to play.
It’ll be interesting to see whether GameStop responds again, or just quietly walks away with its Funko Pop between its legs.
