Struggling retailer Best Buy Co Inc said its founder Richard Schulze has turned down an offer from the board to conduct due diligence in connection with his proposal to take the company private at a valuation of more than $8 billion, writes Reuters. Schulze, the 71-year-old former chairman of Best Buy, said in a letter to the board earlier this month that he was interested in teaming up with private equity partners to buy the company, writes Reuters.
Reuters – Struggling retailer Best Buy Co Inc said its founder Richard Schulze has turned down an offer from the board to conduct due diligence in connection with his proposal to take the company private at a valuation of more than $8 billion.
The consumer electronics chain said its board had authorized its advisors to start talks with Schulze, and had shown “great flexibility” on structuring an agreement that would not limit his ability to make a definitive proposal.
Schulze, the 71-year-old former chairman of Best Buy, said in a letter to the board earlier this month that he was interested in teaming up with private equity partners to buy the company for $24 to $26.
However, he has noted obstacles to making an official bid include a provision of Minnesota law that would prevent him from bringing in private equity firms and his inability to access the company’s financial data.
Best Buy said on Sunday it had offered Schulze a proposal that would have given him 60 days to put together a deal for the company, and would have also have given him the opportunity to take a buyout offer directly to shareholders from January.
“Mr Schulze did not accept the company proposal,” it said in a statement.
A source familiar with Schulze said the executive and his team were “shocked” by the Best Buy statement because they thought they were still in talks with the company over an agreement on due diligence.
A spokesman for Schulze could not be immediately reached.
Best Buy said the board’s proposal would have given Schulze a waiver of Minnesota law so that he could develop a definitive proposal.
It said it asked Schulze to agree to “certain protections for Best Buy and its shareholders, with the goal of limiting outside distractions”, in exchange for opening its books. It did not detail the conditions.
The retailer has previously called Schulze’s proposal “highly conditional” and asked him to name his still undisclosed private equity partners.
Schulze, who owns about a fifth of Best Buy’s shares, has said he plans to fund a deal through a combination of investments from private equity firms, reinvestment of about $1 billion of his own equity, and debt financing.
Last week, Schulze sent the company’s board a second letter saying he would be persistent in stalking Best Buy.
“I still hope to work with the board on a mutually beneficial transaction – but you should know that I am not going away,” Schulze wrote.
Schulze resigned from the company’s board in June and 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.
Best Buy has been closing stores, cutting jobs and trying out a new store format to improve business. It has faced criticism for being too slow to react to a changing retail world, where many use Best Buy as a “showroom” to try out gadgets and then buy them online or elsewhere for less.
Best Buy shares closed on Friday at $20.27.
Image Credit: Best Buy