Best Buy Founder Offers $8.8 Billion to Take Company Private

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Richard Schulze, the founder and former CEO of Best Buy, submitted a written proposal this morning to the firm’s board offering $24 to $26 per share to take the electronics retailer private.

Schulze, who already owns a 20% stake in the firm, would put in roughly $1 billion of his own money to get the deal done, with the rest coming from investment from private equity firms and debt financing, according to the letter.

Best Buy, which became America’s largest electronics dealer by beating out competitors on price and selection, has had a difficulty besting online retailers by those same criteria. Schulze, who stepped down from Best Buy’s board in June, acknowledged these struggles in his letter. Writes Schulze:

“Bold and extensive changes are needed for Best Buy to return to market leadership . . . the company’s best chance for renewed success will be to implement these changes under a different ownership structure.”

The offer price represents a 36% to 47% premium above the price at which Best Buy was trading on Friday, but even that may not be enough to get the deal done. Schulze will have to get unanimous approval from all members of the board for the deal to go through, and might run into opposition from current interim CEO Mike Mikan, who has sat on Best Buy’s board since 2008. Mikan recently announced a turnaround plan of his own, and probably won’t easily reliquish his leadership role. Schulze wrote in his letter that he had talks with former CEO and COO Brad Anderson and Allen Lenzmeier, who are “interested in rejoining the firm” if Schulze were able to take it private, and that may mean that Mikan is the odd man out.

Also, even with the premium, the board may not think the price is right. Anthony Cukumba, an analyst at BB&T Capital Markets told Bloomberg News he thought a takeover of the company would cost at least $30 a share in order to “persuade long-time investors to sell.”

And even if Schulze were able to wrest control of the company from current shareholders, he would still have the vast majority of his work ahead of him. The company reported its first annual loss this year since 1991, and is in the midst of a still-vague turnaround plan that will involve shuttering stores and opening smaller stores that focus on a more limited line of products. But even if these reforms are successful, there are forces beyond Best Buy’s control which make retailing electronics a generally less profitable business to be in. Technological innovation has allowed consumers to get as much done on fewer devices, while media and video game sales will continue to migrate to online venues.

But if a turnaround at Best Buy is possible, Schulze believes it will be best done while in private hands. He argues that the deal he is proposings represents a “win-win” for shareholders and the company, writing “it would allow shareholders to receive compelling value for their shares, and it would allow Best Buy to take the actions that it needs to take outside of the public sphere.”

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PSFan2nite
PSFan2nite

This dog was run over a long time ago; it's just writhing around in the middle of the road in agony, and somebody needs to shoot it and put it out of its misery.  BB has a horrible consumer rep; an entire ocean has flowed under the bridge, and nothing is going to turn that tide.  The only private equity money that could be had will be based on one of those shady financial Bain-schemes, because there is no way to turn this turkey around on sales alone.  BB needs to go in the same can as Blockbuster, The Good Guys and Circuit City.  I might have given BB maybe another 5 years, but as soon as Amazon completes its recently-announced local expansion into the markets like L.A. and S.F. (no wonder Schulze is in a hurry), BB will be dead shortly thereafter.  IMHO, BB can't be flushed soon enough. If I were a BB employee, I'd be submitting a resume to Amazon ASAP.

TomDaniel
TomDaniel

April responded I am taken by surprise that anyone can make $8681 in 4 weeks on the network. have you look this(Click on menu Home)