More than a week after unveiling a takeover proposal for Best Buy - and making little headway - the founder of the struggling electronics retailer is trying to again prod the company into entertaining his offer.
The founder, Richard Schulze, sent a letter to Best Buy's board on Thursday, reaffirming his commitment to buying the company for as much as $8.8 billion. In the letter, he described a takeover as a “win-win†for the retailer and for himself.
“I am deeply concerned about the direction of the company and, as Best Buy's largest shareholder, I cannot simply stand aside,†he wrote. “I still hope to work with the board on a mutually beneficial transaction â€" but you should know that I am not going away.â€
He again asked for directors' permission to conduct due diligence and to form a group of investors to buy the company - a requirement under Minnesota corporate law.
“You can easily test how real my proposal is by granting me permi ssion to form a group and by providing basic due diligence information necessary to present a fully financed offer and allow shareholders the opportunity to receive a substantial cash premium for their shares,†Mr. Schulze wrote.
Thursday's letter was sent after the company declined to provide an immediate response to Mr. Schulze's offer of $24 to $26 a share in cash. Investors, too, have evinced skepticism of a deal happening: While shares of Best Buy have risen 9.8 percent since the bid was unveiled, they remain well below the proposed price.
The letter comes days before Best Buy is set to report its latest quarterly earnings, when the company's current management is expected to announce more details of its own turnaround plan.
In the letter, Mr. Schulze again reiterated that he could raise the necessary funds to pay for a takeover. He said that he would roll in at least $1 billion of his holdings, and potentially all of his 20 percent stake, to help fi nance a transaction.
All told, he would likely need to raise about $3 billion in equity capital, along with perhaps $7 billion in debt financing. His investment bank, Credit Suisse, has said that it is “highly confident†that it can arrange the financing, though people close to Best Buy have scoffed at the possibility.
Mr. Schulze wrote in his letter that he has been told with a number of “leading private equity firms†that they are prepared to commit money, subject to due diligence. Among the leveraged buyout shops that he has been speaking to are Kohlberg Kravis Roberts, TPG Capital, Apollo Global Management and Leonard Green & Partners, according to a person briefed on the discussions.
While he has hoped not to name the firms that he has been talking to, Mr. Schulze may identify them at a later date if it would advance his cause. It is a delicate point, since many private equity firms prefer not to be seen as hostile bidders.
In a statement on Thursday, Best Buy responded:
Best Buy's board of directors will review and consider the letter in due course, consistent with its fiduciary duties, and will, as always, pursue the best course for its shareholders. Minnesota law does not prevent him from further exploring and engaging in discussions with his private equity partners, and he does not need the consent of Best Buy's board of directors to bring forward a proposal that names them.
