Reports: Schulze Resumes Talks with Best Buy, Seeks Board Shakeup
After negotiations broke down over the weekend, Best Buy Company, Inc.’s board of directors has reportedly resumed discussions with Richard Schulze, who is seeking access to the company’s financial information as he attempts to put together a formal buyout offer.
Meanwhile, it appears Schulze is working behind the scenes on a campaign to oust company board directors who are resisting his takeover attempt.
Schulze—Best Buy’s founder, former chairman, and largest shareholder—resigned from the company’s board in June. Earlier this month, he made a preliminary offer to buy the company for $24 to $26 a share, saying he would fund the deal through a combination of investments from private equity firms, about $1 billion of his own equity, and debt financing.
After pressing Best Buy’s board for financial information that Schulze says is necessary to put together a formal offer, the two parties met over the weekend. The company announced that negotiations fell apart after it offered to provide financial data—on the condition that Schulze refrains from taking a buyout offer directly to shareholders until 2013 if the board rejected his offer.
Bloomberg reported Thursday that Schulze and the company have resumed talks. Best Buy initiated the discussions shortly after announcing weaker-than-expected second-quarter results, including a 91 percent drop in profits, Bloomberg reported, citing an unnamed source “with knowledge of the matter.”
There have been several sticking points in the negotiations, Bloomberg reported. For example, Best Buy is asking for a fully committed offer from Schulze within 60 days, while Schulze is seeking 90 days to obtain financing, sources told the news outlet.
Furthermore, Best Buy wants to limit Schulze’s ability to contact the company’s board and top leaders or to replace directors if the company rejects his takeover proposal, sources told Bloomberg.
Meanwhile, a report by the New York Post indicates that Schulze has hired D.F. King & Company—a proxy solicitation firm that specializes in board battles—as he prepares a campaign to oust Best Buy directors who are standing in the way of his buyout attempt.
The New York Post, citing a Best Buy proxy filing, reported that company directors who are at least halfway through their two-year terms can be ousted by a majority shareholder vote. Such a vote could occur prior to the company’s 2013 annual meeting, and directors can be removed “without cause,” an unnamed source told the newspaper.
Schulze is attempting a private takeover during a tumultuous period for the electronics retailer, which has recently experienced declining sales and a major drop in its share price. The company’s former CEO, Brian Dunn, resigned in April amid an investigation involving “an extremely close personal relationship with a female employee.”
On Monday, the company announced that Hubert Joly, the former chief executive of global hospitality company Carlson, will take the reins as CEO in early September—a move that was met with mixed reactions from analysts.
Richfield-based Best Buy is Minnesota’s third-largest public company based on revenue. It reported net earnings of $12 million, or 4 cents per share, for the quarter that ended August 4—down 91 percent from last year’s second quarter, which ended July 30. Revenue, meanwhile, fell 3 percent to $10.5 billion.