Blum Offers $15 Million for Buy.com

Buy.com Inc. founder Scott Blum, whose stake in the company briefly was worth more than $1 billion after it went public last year, announced plans late Friday to buy back the money-losing online retailer, now with a market value of just $23.2 million.

In a terse release, Buy.com said Blum will pay 17 cents a share for the Aliso Viejo company’s stock, its closing price Friday on the Nasdaq. Blum still owns about 37% of Buy.com’s 136.5 million shares, so he will be paying other shareholders less than $15 million.

Blum, 37, is buying the shares through a company he owns called SB Acquisition Inc. As part of the agreement to take Buy.com private, SB will provide Buy.com temporary financing of as much as $9 million, subject to certain conditions, the release said. It didn’t disclose what the conditions were or what Blum might do to revive the foundering company.

Blum and Buy.com executives couldn’t be reached late Friday.

Buy.com aimed to be an online superstore offering a variety of discounted items, but as competition and financial pressures mounted, the company gradually raised prices to move toward profitability. That eroded its business.

After a hefty falloff last holiday season, especially in technology products, its dominant product category, the company announced major staff cutbacks. And its two top executives, Chairman and Chief Executive Gregory Hawkins and Chief Financial Officer Mitch Hill, quit in February.

With losses still widening, Buy.com disclosed in June that Nasdaq officials were seeking to delist the stock for failing to meet the $1 minimum share price.

And last month, the company and several investment banks, along with Hawkins and Hill, were named as defendants in a shareholder lawsuit. The suit alleged that excessive commissions were paid and that shares were allocated unlawfully in connection with Buy.com’s initial public offering in February 2000.

Buy.com lost $133 million last year on sales of $788 million. For its first quarter this year, it lost $45 million, compared with a $33-million loss in the same quarter a year earlier. And its story was no longer one of growth: Sales peaked at $208 million in the first quarter of 2000, but fell to $125 million in the same period this year.

The company said it expects the Blum buyout to close before Nov. 30. Buy.com’s board has approved the transaction, but its shareholders still must vote on it.