GameStop (GME) CEO Ryan Cohen made the media rounds on Friday, saying the company aims to pull off a “very, very, very big” acquisition of a larger consumer company that would be transformational for its future.
Cohen noted that GameStop’s (GME) ideal target will be a consumer company that’s undervalued but that is high quality, durable, and scalable with growth prospects. The GameStop (GME) prey will also have a sleepy management team at the wheel, according to Cohen.
If the massive investment works out, Cohen thinks GameStop (GME) has the potential to be worth several hundreds of billions of dollars, which would also kick in a massive payday for him as well based on his new incentive-based compensation package. “If it works, it’s genius. If it doesn’t work, then, you know, it will be totally, totally foolish,” Cohen summed up to CNBC.
Kicking the idea around a bit, Cohen’s playbook could be to seek a big-box general merchandiser, mass club/discount chain, or department store owner that still has strong real estate and brand equity but trades at a low earnings multiple.
Sticking with only well-known consumer sector names that have seen multi-year share price underperformance creates an intriguing list that includes Best Buy (BBY), Kohl’s (KSS), Peloton Interactive (PTON), Six Flags Entertainment (FUN), and Lululemon (LULU).
Reasonable cases could be made that Dollar General (DG), Dollar Tree (DLTR), Burlington Stores (BURL), Ross Stores (ROST), Five Below (FIVE), Academy Sports + Outdoors (ASO), Big Lots, and Build-A-Bear Workshop (BBW) fit the profile.
On the more creative side, would MGM Resorts International (MGM) fit the bill of a Ryan Cohen financial engineering project? What about privately held Barnes & Noble or Panera? Does CarMax’s (KMX) slide bring it into the M&A discussion? How much firepower does Cohen have to acquire a bigger market cap target?
Add your own M&A guess in the comment stream
GameStop (GME) closed trading on Friday with a market cap of $10.7B after rallying 4.7%.