Best Buy founder proposes taking retailer private

NDTV Profit Desk

06 Aug 2012, 08:53 PM IST

A Dreamliner in Air India colours at an airport in Washington

Best Buy Co Inc founder and former Chairman Richard Schulze offered to take the struggling electronics retailer private on Monday in a deal that values the company at between $8.16 billion to $8.84 billion.

Schulze, who owns 20.1 per cent of the company's stock, said he would offer to buy the shares he does not already own for $24 to $26 each.

Schulze said he has held talks with top private equity firms, but did not name them.

The offer represents a premium of between 36 per cent and 47 per cent over the closing price of $17.64 on Friday.

Best Buy shares traded at $21.94 in premarket trading on Monday.

Under the plan, Schulze, who founded the retailer under the name Sound of Music in 1966, would finance the deal through a combination of private equity investment, about $1 billion of his own equity and debt.

Credit Suisse, Schulze's financial advisor, has informed him it is highly confident it can arrange the necessary debt financing, Schulze said.

Schulze's offer is based on current public information and is subject to due diligence.

He said he has held talks with past executives who are interested in rejoining the company, including former chief executive Brad Anderson and former chief operating officer Allen Lenzmeier.

Schulze resigned from the company's board in June and had said he was exploring options for his ownership stake. He lost the chairmanship after a probe by a board committee found he had failed to tell the board about allegations of personal misconduct by then-CEO Brian Dunn.

Schulze said he made the offer public after making repeated requests to the company for the information he needed to perform due diligence on the proposal.

Best Buy could not immediately be reached for comment.

Best Buy has lost business due to the tendency of consumers to use its stores as a "showroom" to try out electronic products that they then purchase for less money elsewhere, often from online retailers such as Amazon.com.

The company has been closing stores, cutting jobs and trying out a new store format to try to improve its business.

"My feeling is that being private would give them more of an opportunity to experiment, try new things outside the glare of quarterly reports," veteran industry analyst Walter Loeb said.