Consumer electronics retailer Best Buy Co. Inc.'s (BBY: Quote) Founder and former Chairman Richard Schulze, who submitted a proposal to take the company private, on Thursday sought permission from the company's board "to form a group and conduct basic due diligence so that he can present a fully financed offer for the company."
In a letter to the Best Buy board, Schulze said the board has not heeded to his repeated request to provide due diligence information, and also "dismissed my carefully considered proposal as a "highly conditional indication of interest."
"This is a critical time for Best Buy. The decisions that you make over the next few days and weeks may well determine the fate of this great company," Schulze noted.
Schulze made public a proposal on August 6 to take the company private for a price of $24 to $26 per share in cash that attributed an equity value of about $8.8 billion to the company. The offer represented a 36 to 47 percent premium then, and currently represents a premium of 24 to 34 percent premium to Best Buy's closing stock price of $19.36 on Wednesday.
Schulze, also Best Buy's largest shareholder, resigned as chairman and a director of Best Buy on May 7, two weeks earlier than announced, to explore all available options for his 20.1 percent ownership stake in the company.
Schulze has been looking for a leveraged buyout deal to take the company private in order to garner smooth approval from other shareholders for the sale. Under Minnesota law, he requires the board's permission to conduct diligence and also form an investor group to make a takeover offer.
Schulze revealed that the proposed deal would be financed through a combination of private equity investment, at least $1 billion of his own equity investment and debt financing. Schulze said he remains committed to the offer.
He noted that due diligence is necessary for him to secure financing from leading private equity firms, and will be limited to financial data and the standard corporate information, which can be completed quickly.
Credit Suisse (CS), which is serving as financial adviser to Schulze, is also highly confident it can arrange the necessary debt financing, as a number of major banks have expressed interest in the financing.
Schulze said he has "done extensive work to develop a plan focused on renewed growth and increased efficiency to address Best Buy's challenges" as "bold and fundamental changes are needed to return Best Buy to market leadership."
He also confirmed that he has identified a leadership team needed for the company to succeed once again, which includes former Best Buy CEO Brad Anderson and former President and COO Allen Lenzmeier, among others.
"The transaction I am proposing would be a "win-win" for all involved. It would deliver compelling value for shareholders through a significant cash premium, provide new opportunities for customers and create a future for Best Buy employees -- while allowing the company to take the strong actions that will be required to get back on track," Schulze said concluding the letter.
Schulze, aged 71, had spent 46 years with Best Buy and its predecessor company, Sound of Music, after founding the company in 1966. He served as the company's CEO, chairman and a director for 36 years until 2002. Later, he continued as chairman and a director from 2002 until resigning from the board in June 2012.
In Thursday's regular trading session, BBY is currently trading at $19.65, up $0.29 or 1.50% on a volume of 1.34 million shares.
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by RTT Staff Writer
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