Reuters - GameStop, opens new tab proposed on Sunday to buy eBay Inc, opens new tab for about $56 billion in a cash-and-stock deal, with CEO Ryan Cohen saying he was prepared to take ​the bid directly to shareholders should eBay's board be unreceptive.

GameStop - once a stock market minnow that shot to fame during a meme-stock frenzy five ‌years ago - is offering to pay $125 a share in a 50-50 mix of cash and stock, Cohen said in a letter to eBay's board. Based on eBay's Friday close, the bid represents a premium of about 20%.

EBay has a market capitalization nearly four times larger than GameStop, making the buyout bid an ambitious attempt.

The U.S. videogame retailer has already built up a 5% stake in eBay through ​shares and derivatives, Cohen said in the letter, which was seen by Reuters.

Its unsolicited offer to buy the U.S. online marketplace was first reported by the ​Wall Street Journal, citing an interview with CEO Cohen, also GameStop's largest investor.

Cohen, who is pushing to boost the struggling videogame retailer's ⁠market value more than tenfold, told the Journal that putting eBay and GameStop under one roof would create huge opportunities to improve earnings and cut costs.

"It could be ​a legit competitor to Amazon," Cohen said about eBay to the Journal. (AMZN.O), opens new tab
Cohen said in the letter that GameStop would cut $2 billion of eBay's annualized costs within 12 months of ​close, resulting in an increase in the company's earnings per share.

GameStop's 1,600 U.S. locations would give eBay a national network for authentication, intake, fulfillment, and live commerce, he added.

He told the Wall Street Journal he was prepared to pursue a proxy fight if eBay's board was not receptive to the proposal.

EBay did not immediately respond to Reuters requests for comment on GameStop's offer.

"EBay should be worth - and ​will be worth - a lot more money," Cohen said in the interview. "I'm thinking about turning eBay into something worth hundreds of billions of dollars."

Cohen, dubbed the "meme king" by ​retail traders for his role in the 2021 meme-stock frenzy and his outsized influence among individual investors on social media, has built a reputation for bold, unconventional bets that can move markets.

A ‌potential deal ⁠between GameStop and eBay would upend the usual M&A playbook, as it is rare for a company to target one nearly four times its size. Such deals typically rely on substantial debt, stock issuance, or both - banking on future earnings of the combined company to justify the cost.

Cohen said he has already lined up financial commitments, including a commitment letter for about $20 billion in debt from TD Bank, opens new tab, and may seek backing from external investors including Middle Eastern sovereign wealth funds for the deal, according to the WSJ ​report.

Cohen said that following the close, he ​would serve as the CEO of the ⁠combined company.

PUSH TO TURN AROUND GAMESTOP

Cohen joined GameStop's board in January 2021 as the company struggled with a shift to online shopping and digital downloads, and later became CEO, pushing aggressive cost cuts that helped return the company to profitability.

Once a staple for ​in-store gamers, the brick-and-mortar retailer was hit hard during the pandemic when players moved online. GameStop soared to global prominence in ​2021 when an army ⁠of retail investors bought the stock after it was squeezed by hedge fund short sellers. Its shares soared more than 1,700% at the time.

Despite Cohen's turnaround pledges, the Grapevine, Texas-based company continues to grapple with structural shifts in the gaming industry. GameStop reported a 14% drop in fourth-quarter revenue last month.

By contrast, eBay, which has grown from its humble beginnings in ⁠1995 as a ​hobby for entrepreneur Pierre Omidyar, last week forecast second-quarter revenue above Wall Street estimates, banking on demand ​for collectibles and motor accessories as well as live-streamed auctions.

GameStop had a market value of nearly $12 billion at the close of business on Friday, while eBay had a market value of about $46 billion. Their shares have ​gained 32.1% and 19.5%, respectively, this year.