eBay Tuesday rejected Stoppage of play’s $56 billion buyout proposal, calling the unsolicited offer “neither credible nor attractive.”
Stoppage of play CEO Ryan Cohen unveiled a bold bid for eBay last week, 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 around $10.3 billion.
“The Council, with the support of its independent advisors, has carefully considered your proposal and has decided to reject it,” Paul Presslerthe chairman of the board of directors of eBay, wrote in a letter. “We have concluded that your proposal is neither credible nor attractive.”
GameStop did not immediately respond to a request for comment.
EBay listed several concerns about GameStop’s offer, including “uncertainty regarding your financing proposal,” as well as the operational risks and debt that would result from the proposed transaction.
Cohen said GameStop has lined up a $20 billion funding commitment from TD Securities, part of TD Bank, and the company has about $9 billion in liquidity, but the funding gap remains large.
THE financing letterreleased Tuesday by eBay and which is not binding, said that TD’s expression of confidence assumes that the combined company maintains a investment grade credit profile of at least two of the three main rating agencies. CNBC previously reported that TD’s letter included this key condition.
Moody’s Ratings said last week that the proposed acquisition would be “credit negative” for eBay due to the substantial increase in leverage implied by the deal structure.
Many Wall Street analysts threw cold water on the deal, citing a lack of significant synergies between the two companies. Cohen also made an awkward and sometimes combative appearance on the show”Scream box”, where he gave some details on how he would finance the operation.
Read more CNBC tech news“We are offering half cash, half stock, and we have the option to issue stock in order to complete the transaction,” Cohen said. “But all the details of the offer are on our website. We’ll see what happens.”
Cohen said he was prepared to present the offer directly to shareholders if eBay refused to commit.
In his proposal, Cohen pledged to run eBay “much more efficiently,” including reducing headcount and marketing spending, which he said 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 trading.
EBay wrote in its letter that it remains confident in its current management team and that its business has “delivered significant results” over the past several years.
“We have refined our strategic direction, strengthened our execution, improved our marketplace and seller experience, and consistently returned capital to shareholders,” eBay wrote.
The company, whose shares are up 24% since the start of the year, is in the midst of restructuring. Under Iannone, eBay has increased its efforts on so-called targeted categories, such as trading cards, collectibles and pre-owned luxury goods, to differentiate itself from larger competitors like Amazon.
Analysts at Gordon Haskett likened GameStop’s eBay offer to an “unbalanced marriage proposal” and said the chances of the e-commerce company accepting it were low even before releasing its response letter on Tuesday.
“The ball is now in Cohen’s court and he must decide whether to present this offer directly to shareholders,” the analysts wrote in a research note.
— CNBC’s Yun Li contributed reporting to this story.
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GameStop and eBay year-to-date stock chart.
