GoKawiilIn a nutshell: The long-running saga that is GameStop's attempted $56 billion acquisition of eBay might be coming to an end. GameStop CEO Ryan Cohen is reportedly considering withdrawing the audacious bid and proposing a partnership or joint venture instead.
Bloomberg reports that Cohen is weighing a deal that would allow eBay to make use of GameStop's roughly 1,600 US retail locations. The arrangement could help both companies grab a larger share of higher-margin categories. GameStop would also seek seats on eBay's board as part of any partnership.
No final decision has been made, and Cohen could still pursue other options, according to the people familiar with the matter. Neither company has commented on the report.
GameStop's interest in eBay was first reported in early May, when the retailer was worth around $12 billion and its prospective target was valued at roughly $46 billion. Cohen formally submitted the unsolicited offer soon afterward, proposing to pay $125 per eBay share in an equal mix of cash and GameStop stock.
The bid was always going to be a tough sell. Its financing depended heavily on debt and issuing more shares, raising concerns about both GameStop's ability to fund the purchase and the dilution existing shareholders could face. A commitment from TD Securities for up to $20 billion in debt was contingent on the combined business securing an investment-grade credit rating.
Unsurprisingly, eBay's board rejected the proposal later that month, calling it "neither credible nor attractive." It pointed to the uncertain financing, the potential impact on eBay's growth and profitability, operational risks, the proposed leadership structure, and GameStop's governance and executive incentives.
Cohen didn't take the rejection quietly. GameStop increased its eBay holding from a 5% economic stake to 43.4 million common shares, or 9.8% of the company, in July. That made it eBay's second-largest shareholder behind Vanguard funds. Cohen also vowed that GameStop was coming for the marketplace "one way or another."
Cohen previously suggested using GameStop stores as eBay drop-off, shipping, authentication, and live-commerce hubs. Both companies have been expanding their presence in trading cards and other collectibles, giving them some obvious common ground.
GameStop shares rose in early trading following the report, while eBay fell. Since the offer was announced in May, GameStop's stock has dropped 28%, while eBay has gained 7.6%.