Best Buy’s Best Option Seen in Founder’s 40% Premium: Real M&A

Founder and largest shareholder might have best offer on table.

Best Buy store Best Buy store

Aug. 7 (Bloomberg) -- Best Buy Co. founder Richard Schulze may be offering the best option for shareholders, even as traders question his ability to finance the fourth-largest U.S. retail takeover in history.

Schulze, who remains the electronics chain’s largest investor after stepping down as chairman in June, sent a letter to the board yesterday with an acquisition proposal of $24 to $26 a share, valuing Best Buy at as much as $9.5 billion including net debt. Even at an earnings multiple that’s the cheapest on record in the U.S. industry, the bid is as much as 40 percent higher than the stock’s 20-day price, topping the group average, according to data compiled by Bloomberg.

Best Buy, founded by Schulze in 1966, sells everything from computers and televisions to DVDs and mobile phones. Schulze said he would explore all available options for his 20.1 percent stake when he resigned as chairman in June after failing to inform the board of allegations that Brian Dunn, the company’s former chief executive officer, had an inappropriate relationship with an employee.

Schulze sent a letter yesterday to Best Buy’s directors offering to acquire the rest of the company’s equity and net debt, valuing the purchase at as much as $7.6 billion, data compiled by Bloomberg show. That would be the biggest takeover of a U.S. retailer since 2005 when Federated Department Stores Inc., now Macy’s Inc., bought May Department Stores Co., and it would also be the industry’s largest leveraged buyout on record, the data show.

“If consumer sentiment is weak and unless there’s some hot new product that nobody knows about, the stock isn’t getting there in the next year,” Louis Meyer, a New York-based special situations analyst at Oscar Gruss & Son Inc., said in a phone interview. “Schulze is saying, ‘Before this thing becomes a runaway train, we need to interject ourselves.’ He sees the urgency.”

‘Penalty Box’

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