Best Buy Stock Up on Takeover Talk, but Deal May Be Distant

Best Buy’s stock price jumped 10 percent Monday morning and ultimately closed up 6 percent as some sources speculated that a buyout offer is imminent; another report indicated that such an offer is still a ways off.

Shares of Best Buy Company, Inc., rose significantly on Monday on increased speculation that founder and former Chairman Richard Schulze may be close to making a buyout offer for the company.

But a national report indicating that such an offer is still a ways off stifled some of the market’s momentum.

Richfield-based Best Buy’s stock has been hit hard this year, falling as low as $18.02 in May following the release of results from an independent investigation, which found that ex-CEO Brian Dunn violated company policy by engaging in a close personal relationship with a female employee—and that Chairman and founder Richard Schulze “acted inappropriately” when he failed to notify the company’s audit committee after learning about allegations of such a relationship.

Schulze last month abruptly resigned from Best Buy’s board and said he would explore options for his 20.1 percent ownership stake in the company—prompting speculation that he may be attempting to take the company private.

Monday’s climbing stock price followed increased speculation that Schulze may be close to making a buyout offer.

National media outlets, citing sources familiar with the matter, last week reported that Schulze is working with Wall Street bank Credit Suisse Group AG as he explores taking the company private. The Star Tribune, citing an unnamed source, reported that Schulze is close to presenting a buyout offer to the board of directors, possibly as early as this week.

The company’s share price rose about 10 percent Monday morning, peaking at $23.57.

But Reuters, citing an unnamed person familiar with the matter, reported Monday afternoon that Schulze is not expected to present a buyout or other proposal to the company’s board anytime soon. Discussions around a leveraged buyout are still in the early stages, the source told Reuters.

That news seemed to put a damper on market expectations of an imminent offer, and Best Buy’s stock lost some of its earlier gain, closing up about 6 percent at $22.20 on Monday.

The company’s shares were trading down about 2 percent at $21.75 during early Tuesday afternoon trading.

Some recent moves by Best Buy’s board appear to be an attempt to defend the company against a buyout offer from Schulze. The company last month changed its bylaws to require that an investor own at least 25 percent of the company’s stock in order to call a special meeting related to a “change of control.” Schulze and entities that he controls own about 21 percent.

The Star Tribune reported that while that move may make a buyout more difficult, it doesn’t kill Schulze’s chance: He can still arrange an informal gathering of top shareholders to present his pitch and seek support.

Analysts told the Minneapolis newspaper that Schulze could likely buy the company if he offered $30 per share, but he’ll more likely offer between $25 and $30 a share.

Best Buy, which saw an exodus of many key leaders during the past several months, is also proactively working to retain its executives: The company recently awarded $2 million in cash, as well as stock awards valued at roughly $8 million, to four executives in an effort “to enable a stable CEO transition and appropriate continuity of leadership.”