Best Buy founder Richard Schulze offers to buy struggling company
Richard Schulze has offered $24 to $26 a share to buy Best Buy, the teetering electronics retailer he founded in 1966 and helped run for decades before being elbowed out in a scandal this spring.
Schulze is already the Minnesota company’s largest stakeholder, with 20.1%, or about 69 million shares. He is proposing to buy up the rest of the outstanding shares in a deal that, at the midpoint of the range, would value the company at $8.5 billion.
The bid represents a premium of 36% to 47% on Best Buy’s Friday closing price of $17.64 a share. On Monday, the stock surged as much as 22.4% to $21.60 before settling down to $20.27 a share in morning trading.
Schulze was Best Buy’s chairman until May, when he said he would step down after becoming embroiled in a controversy over Chief Executive Brian Dunn’s personal relationship with a female employee.
The company’s audit committee found in an internal probe that Schulze had known about Dunn’s indiscretions long before the committee found out. Dunn resigned in April.
Schulze had spent 36 years as chief executive before becoming the chairman in 2002.
The hullabaloo couldn’t have come at a worse time. Best Buy is facing increasingly strong competition from Amazon.com and Apple. Losses on the balance sheet have forced the company to close dozens of its superstores and shrink others.
Best Buy used to be the authority in the electronics market, but “not anymore,” according to interim Chief Executive Mike Mikan.
Schulze hopes to change that, using $1 billion of his own money and extra private equity help.
In a statement Monday, he said he is trying to persuade former Best Buy Chief Executive Brad Anderson and former President and Chief Operating Officer Allen Lenzmeier into rejoining the company.
“There is no question that now is the moment of truth for Best Buy and that immediate and substantial changes are needed for the company to return to its market-leading ways,” Schulze said in the statement. “After assessing all of my options, it is my strong belief that Best Buy’s best chance for renewed success is to implement with urgency the necessary changes as a private company.”
In a letter to the Best Buy board and his replacement, Chairman Hatim Tyabji, Schulze wrote that Best Buy needed to grow “by reconnecting with today’s customers and building pathways to the next generation of consumers.”
He had hoped to negotiate privately with the company, he said, but “time is of the essence.”
The proposal, he said, is a “win-win opportunity” that “would create a new day for Best Buy employees.”
Best Buy confirmed Monday that it received Schulze’s letter, which it called “an unsolicited, highly conditional indication of interest. The board said it will “review and consider the letter in due course.”
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