Richard Schulze, Founder and former Chairman of Best Buy Co., has submitted a written proposal to the Best Buy Board of Directors to acquire all of the outstanding shares of the company that he does not already own for a price of $24 to $26 per share in cash. The purchase price represents a premium of 36% to 47% to Best Buy’s closing stock price of $17.64 on August 3, 2012.
Mr. Schulze is Best Buy’s largest shareholder, controlling 20.1% of Best Buy shares. He has developed a business plan that addresses the many challenges Best Buy faces and has held discussions with private equity firms interested in participating in the acquisition. Based on these discussions, he plans to finance the proposed acquisition through a combination of investments from the private equity firms, reinvestment of approximately $1 billion of his own equity, and debt financing.
Credit Suisse, Mr. Schulze’s financial advisor, has informed him it is highly confident it can arrange the necessary debt financing. Mr. Schulze has also held discussions with many former Best Buy executives, including former CEO Brad Anderson and former President and COO Allen Lenzmeier, interested in rejoining the company.
Mr. Schulze spent 46 years with Best Buy and its predecessor company, Sound of Music, after founding the company in 1966. He served as the company’s Chief Executive Officer, Chairman and a director until 2002. He continued in the role of Chairman and a director from 2002 until resigning from the board in June 2012.
During the period from 1991 through 2009 when Mr. Schulze, Brad Anderson and Allen Lenzmeier worked together in executive leadership positions at Best Buy, the company’s revenues increased from approximately $900 million to over $45 billion and EBITDA increased from approximately $30 million to $2.9 billion.
“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. 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” said Mr. Schulze.
While he has not reached any agreements with any of the private equity firms or former executives, Mr. Schulze is confident, based on discussions held to date, that he can do so in short order with the consent of the Best Buy Board to form a group.
Credit Suisse is serving as financial advisor to Schulze and Shearman & Sterling is serving as legal counsel.
