Consumer electronics retailer Best Buy Co., Inc. (BBY: Quote) on Monday agreed to allow its Founder and former Chairman Richard Schulze, who submitted a proposal to take the company private, to form an investment group and conduct due diligence in order to float a fully financed offer for the company.
Schulze stated that "he was pleased that an agreement was reached which will allow him to conduct the due diligence he had sought."
Under the deal, Best Buy will provide immediate due diligence access to non-public company information for Schulze, his advisers, potential private equity partners and debt financing sources.
The company will also provide Schulze with a period of 60 days after the due diligence period begins to float a fully financed definitive offer for Best Buy. The period may be extended in certain circumstances, the company said.
Additionally, Schulze will get a waiver of Minnesota law to allow him to work with his private equity partners to float an offer.
Best Buy also noted that Schulze has agreed not to pursue an acquisition until January 2013 if his first offer to take the company private is rejected by the Best Buy board. Later, Schulze will be allowed to make a second offer only in January 2013, with the Best Buy board getting 30 days to review that proposal.
After that, Schulze can take an offer directly to shareholders at the 2013 annual meeting or at a special meeting. However, Schulze has agreed not to pursue an acquisition for a one-year period if he fails to get his offer approved by the board or the shareholders.
Meanwhile, the Best Buy board has also committed to offer Schulze two Board seats, proportionate to his share ownership, provided he does not violate any of the terms of current deal.
Schulze had spurned an earlier offer from Best Buy to conduct due diligence, granted after his repeated requests, as he was said to be unhappy with some terms of the earlier deal to conduct due diligence.
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 more than $8 billion to the company. Best Buy rejected the offer, which then represented a 36 to 47 percent premium, as a "highly conditional indication of interest."
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 to form an investor group to make a takeover offer.
In Monday's regular trading session, BBY is currently trading at $18.28, up $0.97 or 5.60% on a volume of 2.44 million shares.
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by RTT Staff Writer
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