The online marketplace eBay on Tuesday rejected a proposal by GameStop to combine the two companies in a cash-and-stock deal worth about $55 billion, calling it “neither credible nor attractive.”
GameStop announced its proposal last week to combine with eBay, a company nearly four times its size. The offer has confounded much of Wall Street, in part over questions about how the company would afford it. GameStop’s chief executive, Ryan Cohen, initially declined to elaborate on how he would finance the deal.
EBay said Tuesday that it had led a thorough review of the offer with its legal and financial advisers. In a letter to GameStop, eBay’s chairman, Paul Pressler, listed several concerns with the bid, including uncertainty about how it would be paid for and the amount of debt the deal would add to the company.
A cornerstone of the deal was a letter that GameStop secured from the investment bank TD Bank, saying it was “highly confident” it would raise $20 billion to fund the offer. That letter, which was not binding, stated that the confidence rested in part on the assumption that the combined company would be investment-grade.
The ratings agency Moody’s has called the deal “credit-negative,” saying it would balloon eBay’s debt to $31 billion from $7 billion.
Mr. Cohen has said that eBay shareholders would exchange about half their eBay shares for shares in the combined company, most likely providing them with majority ownership of the new entity. He has said publicly that he would rapidly repay the debt.
In the letter on Tuesday, Mr. Pressler also stressed eBay’s improved performance as it has steered a turnaround to compete better with giants like Amazon. Shares of eBay are up about 55 percent over the past year, while shares of GameStop are down about 16 percent.
“We have sharpened our strategic focus, strengthened execution, enhanced our marketplace and seller experience, and consistently returned capital to shareholders,” Mr. Pressler wrote.
This is a developing story. Check back for updates.
