Ebay rejects GameStop's ambitious $56bn takeover approach

(Sharecast News) - E-commerce giant eBay has rejected an audacious $55.5bn bid from video game retailer GameStop, it was confirmed on Tuesday, calling the offer "neither credible nor attractive".

GameStop made a surprise unsolicited cash and stock offer of $125 a share earlier this month. Chief executive Ryan Cohen said at the time that eBay - which is worth around four times more than GameStop - could "be a legit competitor to Amazon" under his leadership.

However, in a letter to Cohen published on Tuesday, eBay chair Paul Pressler said that following a review by company advisors, the board had opted to reject the approach.

He said: "We have concluded that your proposal is neither credible nor attractive. We have taken into account such factors as eBay's standalone prospects, the uncertainty regarding your financing proposal...and GameStop's governance and executive incentives."

Pressler also flagged concerns about how the proposed bid would impact eBay's "long-term growth and profitability", leverage and operational risks, and wider implications for the company's valuation.

He concluded: "Ebay is a strong, resilient business that has delivered meaningful results over the past several years.

"Our team remains focused on executing our strategy and driving our business forward in the best interests of our company, our shareholders [and] our employees."

Ebay was founded in 1995 and has gone on to become one of the world's biggest marketplaces. Last year it posted net income of $2.6bn on revenues of $11.1bn, while GameStop posted net profits of $418m on revenues of $3.6bn.

Cohen claimed he could take $2bn of costs out of the business within a year of the deal completing. He also said he had a commitment letter from TD Securities to provide around $20bn in debt to help finance the takeover, although there was less clarity about where the remaining funds would come from.

GameStop, which has yet to comment on Pressler's letter, currently has a 5% stake in eBay.

As at noon BST, shares in eBay were down 1% in pre-market trading while GameStop had shed 5%.