May 12 (UPI) — EBay on Tuesday rejected the proposed offer from GameStop to buy it, calling the offer “neither credible nor attractive.”
In a letter posted Tuesday, eBay Board Chair Paul S. Pressler wrote that “eBay is a strong, resilient business that has delivered meaningful results over the past several years.”
“We have concluded that your proposal is neither credible nor attractive. We have taken into account such factors as 1) eBay’s stand-alone prospects, 2) the uncertainty regarding your financing proposal, 3) the impact of your proposal on eBay’s long-term growth and profitability, 4) the leverage, operational risks, and leadership structure of a combined entity, 5) the resulting implications of these factors on valuation, and 6) GameStop’s governance and executive incentives.”
GameStop submitted the unsolicited, $55.5 billion offer on May 4, which is also when the video game retailer gained a 5% stake in eBay. The offer was for $125 per share, half in cash and half in stock, which was a 46% rise over the e-commerce giant’s Feb. 4 closing share price.
GameStop’s CEO said that eBay could be doing better.
“It makes us one of the largest shareholders. So they have a fiduciary duty to their shareholders to evaluate this proposal,” GameStop CEO Ryan Cohen told CNBC. “This is a business that is under-earning and can make a lot more money. And GameStop is a good blueprint for that.”
Cohen also argued in a letter to eBay that GameStop’s 1,600 locations “give eBay a national network for authentication, intake, fulfillment and live commerce.”
Some analysts said they aren’t surprised by eBay’s response.
“EBay has officially turned down its lopsided marriage proposal,” Don Bilson, head of event-driven research at Gordon Haskett, wrote in a research note, The New York Times reported. “This news should surprise no one since the odds it would accept GameStop’s brash offer were infinitesimally remote.”
GameStop secured a non-binding letter from TD Bank saying it was “highly confident” the company would raise $20 billion to fund the offer. But that was assuming that the combined company would be investment-grade.
Moody’s has called the deal “credit-negative,” saying it would raise eBay’s debt to $31 billion, from $7 billion, The Times reported. Cohen has said he would cut about $2 billion in costs and repay the company’s debt quickly, but eBay said it’s skeptical.
Shares of eBay have been up about 55% over the past year; shares of GameStop are down about 16%, The Times reported.
“We have sharpened our strategic focus, strengthened execution, enhanced our marketplace and seller experience, and consistently returned capital to shareholders,” Pressler wrote in his letter rejecting the offer. “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.”
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