Sign in with
Sign up | Sign in

Best Buy Founder Fails to Make Company Private

By - Source: Bloomberg | B 30 comments

For now, Best Buy is not going private.

Best Buy said on Friday that founder Richard Schulze did not meet the February 28 deadline to make a buyout offer that would turn the retail chain into a privately-held company. Best Buy said that because a final buyout proposal was not received, it will continue to focus its transformation for the benefit of all of its stakeholders.

Schulze, who founded the company more than 40 years ago, is Best Buy's biggest shareholder with a stake of around 20-percent. He resigned as chairman in June, and then proposed to purchase the company for $24 to $26 a share in August – a proposal valued at $8.16 billion to $8.84 billion, or up to $10.9 billion if debt was included.

By September, the Best Buy founder began analyzing the company's confidential financial data. He also began working with private-equity firms Cerberus Capital, TPG Capital and Leonard Green & Partners to arrange financing. These firms sought three board seats in exchange for acquiring a minority stake in the electronics chain. The proposed price of the investment at one point hit $1 billion, one source said.

But Schulze reportedly wasn't able to acquire the proper debt and equity financing to make a formal proposal by the February 28 deadline. One source stated that it is possible Schulze may return with a last-ditch proposal, but highly unlikely. Bloomberg also reports that there is now a "standstill" agreement which grants Schulze two board seats if he doesn't go directly to shareholders or violate other provisions established by the agreement.

"[Schulze introduced the company to] several impressive private equity sponsors who have expressed interest in an investment in Best Buy," Chief Executive Officer Hubert Joly said on a conference call. "But the cost of these investments, however, was determined to be excessive, and dilutive to our existing shareholders. Therefore, the company concluded to not accept these offers."

Wedbusch Securities analyst Michael Pachter said that Schulze essentially believed he could run the company better than current CEO Hubert Joly – who has closed big-box stores and expended the smaller outlets – and its board, but couldn't get other people to back him. Another said that Schulze simply failed to make a compelling case for going private.

Meanwhile, Best Buy is still cutting jobs. The company said earlier this week that it eliminated 400 jobs at its main headquarters as part of a $150 million reduction in expenses. Even more jobs are expected to be cut before the end of the year, the company said.

 

Contact Us for News Tips, Corrections and Feedback

Discuss
Display all 30 comments.
This thread is closed for comments
Top Comments
  • 10 Hide
    A Bad Day , March 1, 2013 10:30 PM
    One of the major reasons for Best Buy's downfall was its training style for employees. It trained them to treat customers as prey, and BB also allowed 3rd party salesmen to dress up in BB's clothing and go after the customers, in return for some payment.

    (According to one of Forbes' articles)
Other Comments
  • 0 Hide
    Shin-san , March 1, 2013 9:11 PM
    Best Buy has been decent. There's been a few times where I got something that wasn't at another place, or got a deal that somewhere else couldn't do. There's a few things that are only $1-2 more than online (though several things that are far higher), and I don't mind paying that to get my stuff faster.

    But yeah, normally, this isn't the case for very expensive items
  • 1 Hide
    bigshootr8 , March 1, 2013 10:05 PM
    The company hasn't been appealing for some time pricing is more then a dollar or two in computer hardware. Maybe they have great deals I don't know but I know the over price way to many items.
  • 9 Hide
    dgingeri , March 1, 2013 10:05 PM
    It's a lost cause. It's time to abandon ship. Let it die already.
  • 0 Hide
    dalethepcman , March 1, 2013 10:08 PM
    Bestbuy was much better at pricing when CompUSA was still around for competition. Now that their biggest brick and mortar competition is Radio Shack, they can overcharge on many items because they can.
  • 0 Hide
    Anonymous , March 1, 2013 10:09 PM
    A year to 18 months from now it will have gone the way of Circuit City and CompUSA. Sad but true.
  • 4 Hide
    edogawa , March 1, 2013 10:22 PM
    Stores like best buy used to be good, but with online(Amazon, Newegg), and one day shipping, they cannot compete.

    I find it hard to find anything worth browsing through in best buy. They have a very limited selection of quality electronics, games, and PC stuff. Their music and movie/TV show areas seem really good though if you want to go pick up a physical copy.

    Real shame, these coming years will be their last likely, I used to love going into physical stores and browsing.
  • 10 Hide
    A Bad Day , March 1, 2013 10:30 PM
    One of the major reasons for Best Buy's downfall was its training style for employees. It trained them to treat customers as prey, and BB also allowed 3rd party salesmen to dress up in BB's clothing and go after the customers, in return for some payment.

    (According to one of Forbes' articles)
  • 1 Hide
    nebun , March 2, 2013 12:53 AM
    BEST BUY SUCKS BALLS
  • 2 Hide
    CHACHOUU , March 2, 2013 1:25 AM
    soldier2013A year to 18 months from now it will have gone the way of Circuit City and CompUSA. Sad but true.


    What are you talking about there is a Compusa-Tigerdirect across the street from best-buy,where I live in Miami.
  • 1 Hide
    GoodAsGoneAndGoodRiddence , March 2, 2013 2:28 AM
    Best Buy would not stock anything but the crappy PNY laptop memory at its landmark center store in Boston, when I asked them the "Geek" squad if thay would ever stock a better brand, they said no, and they told me to go to Microcenter if I wanted better laptop memory! I had to return the PNY memory to Best Buy and went to Microcenter and got better memory, from that day onward I stopped shoping at Best Buy, Best Buy is to computer retail as Windows 8 is to the desktop/non-touch laptop computer, Crappy to the MAX! Windows 8 Metro and Best Buy will go down the crapper shortly, as they have made their final circle around the bowl!!!
  • 1 Hide
    slabbo , March 2, 2013 3:31 AM
    Fry's Electronics >>> Best Buy if you happen to be lucky enough to have one in your area.
  • 0 Hide
    0660650667072 , March 2, 2013 3:38 AM
    It's truly a shame. This used to be a premier electronics store. Now, it's just limping by. I always loved to go in the local Best Buy and browse; giddy at all the new electronic gizmos and gadgets. I will miss this place if they go the way of so many other corporate giants. Sad.
  • 0 Hide
    anxiousinfusion , March 2, 2013 4:18 AM
    The last thing I bought from Best Buy was NFS Hot Pursuit back in 2011. All of my games are from digital distribution now. They're in a tough spot.
  • 1 Hide
    goodguy713 , March 2, 2013 6:10 AM
    yea Fry's Electronics is a great place to go and they can be pretty competitive when it comes to online pricing now thats not always the case but if you watch there sales they usually either meet or beat deals online. As for best buy .. if you have no other choice and your not computer savy then i guess that's the place to go .. they usually over charge and over rate products .. now i cant say the same about tv deals i got a great deal a few years ago but any more.. the stuff they carry isnt really exclusive in any way.. so its really not worth a visit.
  • 4 Hide
    fuzzion , March 2, 2013 7:30 AM
    nebunBEST BUY SUCKS BALLS


    Are you 5 yrs old?
  • 1 Hide
    techjunker762a , March 2, 2013 8:08 AM
    I miss the old days when there is Compusa. circuitcity. big kmart. everything is here before 2006. sooner I m gonna to miss bestbuy and lose the excitement on a tradition blackfriday I had the last 10 years.
  • 4 Hide
    tenshin111 , March 2, 2013 8:50 AM
    fuzzionAre you 5 yrs old?


    He's not even 4.
  • 0 Hide
    amoralman , March 2, 2013 9:46 AM
    Quote:
    it will continue to focus its transformation for the benefit of all of its stakeholders.


    This is what I hate about public companies. Their only concern is their shareholders, whatever it takes.
  • 1 Hide
    blppt , March 2, 2013 12:51 PM
    Quote:
    What are you talking about there is a Compusa-Tigerdirect across the street from best-buy,where I live in Miami.


    Not the same....TigerDirect bought the CompUSA name a few years back. They also bought Circuit City's name. Those companies used to be completely separate B&M entities back in the day. Now, its just 2 more TigerDirects.
  • 1 Hide
    nebun , March 2, 2013 1:18 PM
    fuzzionAre you 5 yrs old?

    more like 6 :) 
Display more comments
Tom’s guide in the world
  • Germany
  • France
  • Italy
  • Ireland
  • UK
Follow Tom’s guide
Subscribe to our newsletter