GameStop, worth $12B, explores acquisition of eBay, worth $30B. The approach is seen as pressure on eBay's board to sell or break up, sources said.
GameStop (GME) is exploring a potential acquisition of eBay (EBAY), according to a report from The Street. GME shares rose about 7% in after-hours trading. EBAY added roughly 3%.
The approach is less about a strategic merger and more about forcing change at eBay, people familiar with the matter said. GameStop has a market value of about $12 billion. eBay is worth roughly $30 billion. Financing a full buyout of eBay would be a challenge for GameStop, analysts said. The move appears designed to pressure eBay's board into a sale or a breakup, the people said.
GameStop has held informal discussions with potential financing partners. No formal bid has been made. GameStop's board has not yet authorized a formal offer. Talks are at an early stage, the people added.
Ryan Cohen, GameStop's chairman and largest individual shareholder, has a history of activist investing. He previously built a stake in Apple and pushed for a share buyback. At GameStop, Cohen has overseen a shift toward e-commerce and digital downloads. GameStop's core business of selling physical video games has continued to shrink.
An acquisition of eBay would give GameStop access to a global marketplace platform. The strategic rationale is thin, analysts said. eBay's business is built around person-to-person sales of used goods and refurbished electronics. GameStop focuses on new game hardware and software. The overlap is limited to trading card sales, a business eBay dominates and GameStop has only recently entered.
The more likely outcome is that GameStop's interest serves as a catalyst for eBay to explore its own strategic alternatives. eBay has been under pressure from activist investors for years to spin off its classifieds business or sell itself. eBay's board has resisted those calls, arguing that a breakup would destroy value.
For GameStop, the play carries risks. Even if a deal were structured as a stock-for-stock merger, GME shareholders would face dilution from a company with a declining core business buying a slow-growth marketplace. GME's Alpha Score is 44/100 and EBAY's is 54/100, both in Mixed territory. A sale process, if it materializes, could change that calculus.
No timeline has been set for GameStop to make a formal approach. GameStop has not commented publicly on the report.
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