Skip to main content

Best Buy Founder Fails to Make Company 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

  • Shin-san
    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
  • bigshootr8
    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.
  • dgingeri
    It's a lost cause. It's time to abandon ship. Let it die already.
  • dalethepcman
    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.
  • A year to 18 months from now it will have gone the way of Circuit City and CompUSA. Sad but true.
  • edogawa
    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.
  • A Bad Day
    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)
  • nebun
    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.
  • GoodAsGoneAndGoodRiddence
    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!!!