Board rejects $56 billion offer as Ryan Cohen weighs going hostile
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Why it matters
Cohen is trying to buy a company larger than GameStop with borrowed money. The outcome tests whether meme-stock cash can rewrite US e-commerce ownership.
GameStop's CEO Ryan Cohen Baffles Fans With eBay Bid - The New York Times
Ryan Cohen's mysterious bank letter backing his eBay bid reveals a big issue
Ryan Cohen Tells Us Why He's Serious About Buying eBay - Business Insider
EBay rejects GameStop's $56 billion takeover bid
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Jim Cramer on GameStop's $56B offer for eBay: eBay is better ...
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GameStop CEO Ryan Cohen $56B eBay offer: 'An opportunity ...
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"A board that calls fifty-six billion dollars neither credible nor attractive has confused their own comfort for their shareholders' interest — a mistake I never made twice. Go hostile, young man; the directors work for the owners, not the other way around, and it's high time someone reminded them of it."
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GameStop is a video-game retailer turned activist investment vehicle under Ryan Cohen.
eBay is a global online marketplace that connects more than 130 million buyers with small sellers.
TD Bank provided GameStop's $20 billion debt commitment letter for the eBay bid.
Moody's is one of the three major credit rating agencies that lenders and bondholders rely on.
eBay's directors formally turn down the offer, citing financing concerns and the leverage burden. Moody's had separately warned the deal would be credit negative.
GameStop sends eBay's board a nonbinding offer at roughly $125 per share, attached to a $20 billion TD Bank commitment letter contingent on an investment-grade rating.
Predict which scenario wins. Contrarian picks score more — points lock in when the scenario resolves.
Cohen raises the price modestly, files a tender offer directly with eBay shareholders, and runs a proxy fight to replace the board at the next annual meeting. He needs roughly 50% of shares tendered and enough proxy support to install a board that will sign a merger agreement.
Moody's confirms a downgrade to junk for the combined company. TD Bank's commitment lapses because the investment-grade condition cannot be met. Cohen pulls the offer rather than scramble for replacement financing.
Cohen sweetens the cash portion or adds protections, and eBay's board returns to the negotiating table. The two sides sign a merger agreement at a higher price than the rejected $125 per share, with the board recommending the deal.
A larger strategic buyer, such as a major retailer or private equity consortium, files a superior offer for eBay. That gives eBay's board a stronger position to refuse Cohen and accept the new bidder.
Microsoft offered $44.6 billion ($31 per share) for Yahoo in February 2008. Chief executive Jerry Yang's board rejected the bid as undervaluing the company. Microsoft raised its offer to $33 per share. Yahoo still refused, and Microsoft walked away in May.
Yahoo's stock cratered after Microsoft withdrew. By December 2008, shares traded below $12, less than half the rejected offer.
Yahoo never recovered as an independent company. Verizon bought its core internet business for $4.5 billion in 2017, roughly one-tenth the rejected Microsoft offer.
eBay's board has reached the same conclusion Yang's did: the bid undervalues the company. Hostile suitors invoke the Yahoo precedent to argue that boards who refuse to engage punish their own shareholders.
Kraft Foods made an unsolicited £10.2 billion bid for British confectioner Cadbury. Chairman Roger Carr called it 'derisory.' Kraft went hostile, took the offer directly to shareholders, and raised its price several times. Cadbury accepted in January 2010 at £11.9 billion.
Kraft took on heavy debt to finance the deal. UK politicians attacked the takeover as a foreign raid on a national institution.
Kraft later spun off Cadbury into Mondelez International. UK takeover rules tightened to require greater commitments from foreign buyers.
Cadbury shows the playbook Cohen would run if he goes hostile: bypass the board, raise the price, win over shareholders one by one. Cadbury's board capitulated when 71% of shares were tendered to Kraft.
RJR Nabisco's chief executive proposed a $17 billion management buyout. KKR launched a competing hostile bid. After a six-week battle, KKR won at $25 billion, the largest leveraged buyout in history at the time. The deal saddled RJR with $19 billion in debt.
RJR cut costs sharply. KKR sold off divisions to service interest payments.
The deal lost KKR money over its life. The book 'Barbarians at the Gate' became the cautionary tale of leveraged-buyout excess, and rating agencies grew warier of debt-heavy megadeals.
Moody's 'credit negative' warning on the GameStop deal echoes the RJR concerns. When a buyer loads a target with debt, the rating downgrade can wreck the financing before the deal even closes.