Best Buy Co. founder Richard Schulze, who stepped down as chairman this year, offered to take the electronics retailer private at $24 to $26 a share. Best Buy shares surged as much as 34 percent in early trading. Credit Suisse Group AG, Schulze’s financial adviser, is confident it can obtain financing for an offer, according to a letter sent to the board today. The offer is at least 36 percent more than Best Buy’s closing price Aug. 3, and the midpoint of the range gives the company an equity value of $8.5 billion.
Schulze, who held more than 20 percent of Best Buy as of June, plans to contribute $1 billion in equity from that stake, the letter shows. The rest of the money will come from what the letter calls “premier private-equity firms with deep experience in retail who are interested in a possible acquisition of Best Buy” and debt financing. The Richfield, Minnesota-based electronics chain had about $1.7 billion in long-term debt as of May 5, according to regulatory filings.
“I have been actively exploring all available options for my ownership stake,” Schulze, 71, said in the letter. “That exploration has reinforced my belief that bold and extensive changes are needed for Best Buy to return to market leadership and has led me to the conclusion that the company’s best chance for renewed success will be to implement these changes under a different ownership structure.”
The stock climbed as much as 34 percent to $23.55 in trading before U.S. markets opened. Best Buy shares rose 1.4 percent to $17.64 Aug. 3 in New York trading.
Sue Busch, a spokeswoman for Best Buy, said she couldn’t immediately comment. Through a spokesman, Schulze declined to comment on the letter.
Schulze is seeking the board’s permission to conduct due diligence on the electronics retailer and form a group including private-equity funds and other executives that would make a more complete offer. Under Minnesota corporate law, Schulze needs permission from company directors to form such a group. His offer will have no deadline as yet, and it’s subject to being able to conduct due diligence.
“With the board’s agreement that I may work together with potential private equity partners and former senior executives, and with timely access to relevant non-public company information, I am confident that the necessary due diligence could be completed expeditiously and a binding agreement to acquire Best Buy could be reached quickly,” Schulze said. “I am prepared to enter into a customary confidentiality agreement and begin work immediately.”
Schulze has negotiated unsuccessfully with the board for the past several weeks, seeking permission to conduct due diligence and form a bidding group, said a person familiar with the matter. Best Buy’s board told Schulze it wasn’t a good time to go private because it was looking for a new CEO, and asked for three more weeks to consider the matter, said this person. No private-equity firms are named in the letter, yet Schulze has sought out and received interest from funds that want to be part of his effort, said this person. He would likely have two buyout firms backing his offer, said this person.