As part of his audacious takeover proposal for Best Buy, the company he founded decades ago, Richard Schulze said that he would contribute about $1 billion of his holdings into a leveraged buyout offer.
But Daniel Binder, an analyst with the Jefferies Group, wondered why he wasn't rolling in more of his shares.
Here's what Mr. Schulze wrote in his letter to the retailer's board on Monday: “The transaction would be financed through a combination of investments from private equity firms, my equity investment of approximately $1 billion, and debt financing.†According to regulatory filings, he owns a 20.1 percent stake, or about 68.9 million shares.
In a research note on Tuesday, Mr. Binder wrote that, assuming the midpoint of Mr. Schulze's $24-to-$26 price range, the Best Buy founder would still have a little more than $700 million in stock available. The analyst writes that there are a couple of different musings:
- Mr. Schulze doesn't believe in his strategic plan, which doesn't make sense given the energy and expense he has apparently devoted.
- He is protecting his downside by holding onto the additional shares.
- Mr. Schulze has been asked to reduce his stock holdings by prospective partners who want to ensure that he has a minority stake in a newly private Best Buy.
Mr. Binder elaborates on the final possibility thusly:
In a deal that would require an estimated $4 billion of equity, his $1 billion would give him 25% equity versus his current 20%. Rolling over all his equity would probably put him closer to a 44% holder.
The truth may be more prosaic. A person briefed on Mr. Schulze's plans said that the $1 billion figure is preliminary, and that he is willing to contribute all of his holdings if necessary.
