GameStop Announces Shocking Buyout Offer For eBay, Priced At $55.5 Billion

The latest chapter in video game retailer GameStop's tumultuous story is unfolding, as the company has announced plans to make a deal to buy eBay for $55.5 billion.

GameStop said in a news release that it submitted a "non-binding proposal" to buy 100% of eBay at $125 per share in cash and stock, at 50% each. This would be about a 20% premium over where eBay's stock was trading on Friday and a 46% premium to eBay's closing price on February 4 this year. That was the day that GameStop started buying eBay stock. Today, it owns about 5% of eBay's outstanding stock.

CEO Ryan Cohen told The Wall Street Journal, "There is nobody who is more qualified, based on my experience, to run the eBay business," he said.

"eBay should be worth--and will be worth--a lot more money. I'm thinking about turning eBay into something worth hundreds of billions of dollars," he said.

GameStop, as a company, has a market cap of around $12 billion, compared to eBay's $46 billion. Cohen said he has $20 billion in debt financing from TD Bank to help get the deal done for eBay. GameStop also has about $9 billion in cash on hand. To make up the difference, GameStop could look for outside funding, including from Middle East sovereign wealth funds, the report said. There is no word on how eBay is feeling about selling itself, and it's possible no deal materializes.

In its news release, GameStop said it will deliver $2 billion in annualized cost reductions within the first 12 months of buying eBay, should the deal go through. This would include $1.2 billion in cost-cutting from sales and marketing at eBay, along with $300 million from product development, and $500 million from general and administrative costs.

Cohen would become the CEO of the combined company of GameStop and eBay, if the deal comes together.

This shocking news first came to light on Friday, when WSJ reported that Cohen was eyeing a deal for eBay--this report helped drive up the prices of eBay and GameStop shares after the market had closed for the week. The share prices for both companies rose further after this newest report emerged today, May 3.

Cohen going after a big company for a buyout is not a surprise, as the executive himself said this past January that he would do just that. At the time, he admitted that his plan might not work.

"It's ultimately either going to be genius or totally, totally foolish," he said of his plans to buy a company to help accelerate GameStop's transformation and make it a $100 billion company.

Cohen would personally stand to benefit in a major way if he can succeed in transforming GameStop's business into a $100 billion behemoth. Earlier this year, GameStop announced a new compensation package for Cohen that would pay him as much as $35 billion if he can reach certain extremely lofty market value and profitability targets, including reaching a valuation of $100 billion.

Cohen himself owns about 9% of GameStop. He takes no salary or cash bonuses under his employment agreement, along with "no golden parachute," the release said.

Cohen's role as GameStop CEO has been controversial, as the billionaire Chewy founder has overseen a dramatic downsizing of the company's business with layoffs, store closures, and selling off the iconic gaming magazine Game Informer.

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