Facing a deadline on Dec. 16, Best Buy's founder will formally try to take the company private by Saturday, source says.
Updated: December 13, 2012 - 9:10 AM
Best Buy Co. founder Richard Schulze will make a fully financed offer to purchase the consumer electronics giant by the end of the week, possibly on Friday, the Star Tribune has learned.
Schulze will submit a formal proposal to the board of directors before a "hard" deadline of Sunday, said one source. The offer is expected to be at least $5 billion to $6 billion.
"This is going down to the wire," the source said.
Over the past weekend, Schulze and his team secured agreements to finance the deal from bankers and private equity investors, which includes Cerberus, Leonard Greene & Partner and the Texas Pacific Group, the source said. Schulze will meet with his top advisers, including former CEO Brad Anderson and former president Al Lenzmeier, in Minnesota on Thursday and Friday as they prepare to move forward.
Best Buy declined to comment on Wednesday.
Founded by Schulze as a single store in St. Paul in 1966, Best Buy has grown into a global retail powerhouse with more than $50 billion in annual sales and more than 100,000 employees.
While it remains unclear how much Schulze will offer for the company, investors expect the bid to be much lower than the range of $24 to $26 per share that Schulze first outlined over the summer. Since late June, Best Buy stock has fallen 45 percent, closing Wednesday at $12.20 per share.
The recent stock plunge surprised Schulze so much that he requested a 30-day extension from the original deadline of mid-November to see how Best Buy's holiday numbers would hold up, sources said.
At this point, institutional investors and analysts speculate that shareholders would be open to selling their stake to Schulze, although they would prefer at least $17 per share, a 40 percent premium over the company's current stock price. In after hours trading Wednesday, Best Buy stock jumped 3.6 percent.
Now that Schulze appears ready to make a credible bid, the big question will center on how the board responds to the offer. Under the original negotiating terms between Schulze and Best Buy, Schulze can make a second offer in January if the board rejects his initial bid. Indeed, a source close to Schulze previously told the newspaper that he expected the board to say no the first time.
Schulze's relationship with the company has improved considerably over the past several months after a tense parting earlier this year.
In May, the Best Buy board, led by G. "Mike" Mikan, forced Schulze to resign as chairman after it determined the founder withheld information about allegations that then CEO Brian Dunn had an affair with a female employee.
At the time, much of Wall Street believed Mikan, who was named interim CEO, would get the job permanently. But in a surprise move, Best Buy in September named Hubert Joly, a former Carlson CEO with close ties to Anderson, as its new leader.
Joly has since worked hard to improve Best Buy's relationship with Schulze. At the behest of the board, Joly had arranged for Schulze's buyout team to speak to executives throughout the company. Joly also kept Schulze updated about key hires, including Sharon McCollam as chief financial officer and Shawn Score as U.S. retail chief.
Joly also has publicly praised Schulze several times to analysts and reporters. Last month, Joly met with Schulze, Anderson, and Lenzmeier to discuss turnaround strategies.
Thomas Lee • 612-673-4113
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