Schulze Rejects Stipulation that Could Delay Best Buy Takeover
Richard Schulze has rejected a proposal by Best Buy’s board—one that would have allowed him to review the company’s financial data in order to put together a formal buyout offer, but that also required him to delay a takeover attempt until 2013 if the board rejected his offer.
When announcing his buyout offer, Schulze said he plans to finance the proposed deal through a combination of investments from private equity firms, about $1 billion of his own equity, and debt financing. While he hasn’t reached formal agreements with private equity firms, he said he is “confident” that he could do so “in short order,” assuming that the board allows him to create a group to perform due diligence.
Last week, Schulze wrote a follow-up letter to the board, repeating his request to access financial information and stating that “I am not going away.”
Best Buy said that its board met Friday to discuss Schulze’s buyout offer and developed a proposal that included “a routine and customary request that Mr. Schulze agree to certain protections for Best Buy and its shareholders.” It stipulated that, in the event that the board rejected Schulze’s buyout offer, he could not take his buyout plan directly to shareholders until January. Schulze rejected the offer, Best Buy said.
Schulze, meanwhile, said in a statement that Best Buy initially proposed an “18-month standstill” period, which he described as “completely unacceptable.” Schulze said that while he was attempting to negotiate “an acceptable standstill period,” the board publicly terminated the discussions.
“I am shocked by this course of action, but as the largest shareholder of Best Buy, I remain hopeful that the board will engage in good faith discussions with us for the benefit of shareholders, employees, and customers,” Schulze said. “Time is of the essence, and it is imperative that shareholders’ interests are not further jeopardized.”
The New York Times, citing unnamed sources with direct knowledge of the matter, reported that Best Buy’s board did initially demand that Schulze refrain from going directly to shareholders for 18 months, but on Saturday, it reduced that period to a year. On Sunday, the standstill period was again shortened, this time to January 1, which would allow Best Buy to get through the holiday season without Schulze approaching shareholders with an offer, The New York Times reported. But negotiations now appear to have stalled.
In a Monday statement issued in response to Best Buy’s appointment of Hubert Joly as CEO, Schulze said he remains committed to his buyout offer and is “eager to resume our discussions immediately if the board is truly interested in reaching an agreement in shareholder interests.”
Schulze previously said that he has tapped former Best Buy CEO Brad Anderson and former President and Chief Operating Officer Al Lenzmeier to serve on his leadership team, in the event that his takeover is successful.
Best Buy—Minnesota’s third-largest public company based on revenue—has recently shuttered stores and laid off workers as it attempts to reinvent itself and compete with online retailers like Amazon.com. Following Best Buy’s announcement that Schulze rejected its due diligence offer, as well as the news that it appointed a new CEO, shares of the company’s stock were trading down more than 7.5 percent at $18.74 early Monday afternoon.