AMERICAN electronics retailer Best Buy may be taken private after founder and former chairman Richard Schulze made an offer to the company’s board valuing it at up to $9bn (£5.8bn) yesterday.
Schulze’s offer to buy the 80 per cent of Best Buy he does not already own sent shares in the retailer up 17 per cent, the company’s biggest gain in a decade, but they did not reach the $24 to $26 he is offering.
Schulze laid out proposals for the deal, which is being advised on by Credit Suisse, in an open letter to Best Buy’s board of directors. He intends to contribute $1bn from his current stake to the deal, with the rest provided by private equity firms.
Best Buy said yesterday that the board “will review and consider the letter in due course” and that it will “evaluate this proposal carefully”.
Schulze said: “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.” The retailer has struggled in the face of competition from cheaper online rivals, and reported a $1.1bn loss last year, but Schulze promised he had a plan to revive the company’s fortunes, saying the “best chance for renewed success is to implement with urgency the necessary changes as a private company”.
Best Buy launched a joint venture with Carphone Warehouse in the UK last year, opening 11 stores, but they were all closed after they failed to turn a profit.
The two companies continue to have a relationship, with Carphone Warehouse due to sell in special zones of Best Buy’s Chinese stores. The British firm’s founder and chairman Sir Charles Dunstone told City A.M. yesterday he didn’t believe a deal would affect the companies’ working relationship.
PROFILE: RICHARD SCHULZE
After six years as a sales representative for an electronics manufacturer, Richard Schulze founded Best Buy in 1966. The 25-year-old opened his first store, then known as The Sound Of Music, in his home town of Saint Paul, Minnesota.
The store sold hi-fi equipment and was an instant success, leading to Schulze opening several other outlets in the area. In 1983 the board changed the company’s name to Best Buy and two years later it floated on the New York Stock Exchange. By 1993 it had become America’s second-biggest consumer electronics retailer.
After 30 years as chief executive of the company, Schulze stepped down in 2002, becoming the firm’s chairman. However, he was forced to resign from his position in May this year after an internal investigation was launched into Schulze’s appointment of Best Buy’s then chief executive Brian Dunn. The probe found that Schulze has failed to alert Best Buy’s audit committee to the fact that Dunn was in a relationship with a female colleague. Dunn had resigned as chief executive a month earlier.
Schulze continues to hold a 20 per cent stake in Best Buy and remains on the company’s board. His tenure at the company led to him amassing an estimated $2bn fortune, and he was ranked as the 157th richest man in America by Forbes magazine last year.
The father of 10, now 71, even has a day in his honour in Minnesota, with 9 November designated as Richard M Schulze day.