Finance

Best Buy to Go Private?

Best Buy’s co-founder is looking to make a buy of his own, offering to take the electronics seller private only months after leaving as the company’s chairman.

Best Buy said it would consider the offer but called it “highly conditional.” And analysts are skeptical that former Chairman Richard Schulze’s opening offer of $24 to $26 per share would get a deal done and that it could be tricky to line up investment firms to help pay for it.

It‘s the latest twist in the Minneapolis company’s struggles to stay relevant as more people buy electronics online. Over the past year, it has announced a major restructuring plan and fired CEO Brian Dunn amid allegations that he had an inappropriate relationship with a female employee.

Best Buy is trying to avoid the fate of its rival Circuit City, which went bankrupt in 2009, partly because of changing shopper habits.

The offer values the company at as much as $8.84 billion. Schulze already has 20.1 percent of the stock in the company, so paying for the rest of shares would mean coming up with about $6.9 billion.

Best Buy to go Private?Best Buy founder Schulze said Monday, Aug. 6, 2012, that he wants to take the electronics retailer private by buying up all of its shares he doesn’t already own in a deal that values the company at as much as $8.84 billion. (AP Photo/The Canadian Press, Chuck Stoody, File)

Schulze resigned as chairman in May, after Dunn’s departure. A company investigation found that Schulze knew about the inappropriate relationship and failed to alert the board or human resources.

Schulze had been expected to stay on the board until the company’s annual shareholder meeting in June, but he resigned unexpectedly before the meeting and said he was exploring options for his hefty stake in the company. Analysts had been expecting a possible bid since that announcement.

“Immediate and substantial changes are needed for the company to return to its market-leading ways,” Schulze said in a statement. “It is my strong belief that Best Buy’s best chance for renewed success is to implement with urgency the necessary changes as a private company.”

Schulze‘s offer would represent a 36 percent to 47 percent premium over the company’s Friday closing stock price.

Schulze said he would have preferred to pursue a deal privately but went public with the offer for the sake of speed.

“I am deeply concerned that further delay and indecision will cause additional loss of both value and talented leaders who are now uncertain of the company’s future,” Schulze said in a statement.

Best Buy has been shrinking store size and focusing on its more-profitable products such as mobile phones. It’s also trying to combat the so-called “showrooming” of its stores – when people browse at Best Buy but purchase electronics goods elsewhere, especially online.

In March, it announced a major restructuring that includes closing 50 stores, cutting 400 corporate jobs and trimming $800 million in costs.

Since Dunn’s departure, interim CEO Mike Mikan has made strong statements about how he plans to restructure the company, focusing on services and revamping stores.

In early July, Best Buy said it would lay off 600 staffers in its Geek Squad technical support division and 1,800 other store workers.

Follow Becket Adams (@BecketAdams) on Twitter

The Associated Press contributed to this story.

Comments (24)

  • 2AFirearmsDealerDotCom
    Posted on August 7, 2012 at 1:49pm

    I hate to say it, but most consumers in todays economic age will decide upon an item they want, then search for the lowest price they can get it…period. This usually means online, out of state, with low shipping costs.

    That is how I get a lot of my business. People see I have the lowest prices and order to save some money.

    That is also how I lose a lot of business. Even with low prices, local buyers have to pay sales tax, and that is a huge difference when you are talking about competition with margins as low as 3-5%, as it is in many retail businesses.

    Report Post » 2AFirearmsDealerDotCom  
  • smasaoka
    Posted on August 7, 2012 at 9:10am

    Anyone read Consumer Complaint Board regarding Best Buy and/or Geek Squad? Do so. I purchased a laptop and all the warranties. When renewal time, thought renewed all, but in fact they didn’t renew the “hardware” and informed hardware usually good for first year and not cost effective to offer renewal after that! Soon after expiration, 2:3 USB ports didn’t work. Took it in, they tested it and said “a virus”, and that would make them work. Left it, and when they called, informed me the ports didn’t work and the estimated cost which angered me. When picking it up the “Manager with over 30 years exp” waited on me. I said about the warranty and first called me a liar, then said “you should have bought the 2 year policy”! He then told me all he could do and maybe it wasn’t the ports, but I told them “the agent said he had done all that; I even signed papers that I hadn’t backed up anything and if lost not their fault”. He said the notes said it wasn’t done. Was then informed it was never done! I asked for the laptop back and I was filing a complaint with Consumers and he said, “I could care less!” I’ve never had a “manager with 30 years experience” talk so down to me, not allow me to speak and continually interrupted me!

    They have lost a customer.
    .

    Report Post »  
  • smasaoka
    Posted on August 7, 2012 at 8:58am

    Has anyone read Consumers Complaint B about Best Buy? There are a lot; lot including Geek Squad. Had bought a laptop paying a steep price for the warranties. Renewal time I was not offered one-for the hardware-informed they don’t usually go bad first year but not cost effective to continue offering a warranty thereafter. Soon after the warranty expired, 2:3 USB ports wouldn’t work, and took in for repair. Told them the problem, they-after check said it was a “virus” and would solve the problem. In two days, called to say the USB ports weren’t working and the cost woulFirst, the Geek Manager called me a liar and then said it was my fault I should have got a 2-year warranty when I had the chance! I told the Store manager, who informed me it was my fault I should have gotten a two year instead of one year. Took the laptop because 2:3 USB ports weren’t working. The “Agent” said via their check it was a virus and it would be taken care of under the present warranty. Two and one/half days later called me to say it was the UBS ports and the cost would be a couple of hundred dollars! Per Consumer’s Complaint department I found the answer to my problem without being charged any money. ) The “head man” who said he had 30 years experience wouldn’t listen to me, over talked me and when I told him I just wanted to take the computer back, and was making a compaint with Consumers, his answer was: “I could care less”! Best Buy has lost a customer for

    Report Post »  
  • LameLiberals
    Posted on August 7, 2012 at 1:40am

    Best Buy is a muslim owned company.

    I flat out refuse to buy anything in their stores and never will. I hope they go out of business.

    And so is Church’s Chicken. DO NOT EAT THERE. They drove franchise owners into bankrupsy after buying Church’s Chicken and THEN refusing to let them sell pork.

    http://www.debbieschlussel.com/3696/racist-sharia-bankrupts-black-maryland-couple-shuts-down-their-restaurant/
    The Beasleys owned a Church’s Fried Chicken franchise. They planned to offer breakfeast dishes, including pork and bacon. But, once Arcapita acquired Church’s, Arcapita’s strict sharia compliance requirements were foisted upon the Beasley’s and they were restricted from selling the breakfast items. They say this is the reason their business failed and that they were driven to bankruptcy. They lost everything, including their home, as a result. In their lawsuit, the Beasleys claim that Arcapita allowed White-owned franchisees to continue to sell the non-halal offerings in their stores.
    If this is true–and I imagine they must have some proof of White-owned Church’s that sell non-halal meat and poultry–then it is emblematic of a part of Islam that is rarely broached in America: Islam’s racist attitude against

    Report Post »  
    • wbryers
      Posted on August 7, 2012 at 3:49pm

      So…….how does this relate to Best Buy?

      I work there. It’s wall-to-wall white people. We say Merry Christmas and get Easter Sunday off. Stop being a paranoid freak.

      Report Post »  
  • servant100
    Posted on August 6, 2012 at 11:16pm

    Used to swear by this place during the late 90′s up to 2003..then it got very sloppy. Before 2005 you bought something from Best Buy and they always made it good…so I bought all my computers and other appliances from them. After 2005 it all fell apart…Sloppy service, farmed out repairs by the electronic equivalent of “dog the bounty hunter”…and a lying bunch of corporate jerks who would say anything… Stopped buying anything from Best Buy about 5 years ago after they broke my laptop in their :repair mill…and then had the gall to blame it on me.

    Started buying my laptops from Toshiba…Since Best Buy’s warranty is worth less than toilet paper,..it makes more sense to go direct to the manufacturer and get a better deal. I would never NEVER send ANYTHING to the “Geek Squad” because they know absolutely NOTHING about computers or anything else…

    Best Buy deserves…RICHLY DESERVES to go bankrupt…and I as one of the many consumers that this corporate jerk screwed…will delight to buy some serious tap shoes for dancing on their grave…

    Report Post »  
    • LameLiberals
      Posted on August 7, 2012 at 1:41am

      Best Buy is Muslim owned now. They enjoy sticking it to the infidels.

      Report Post »  
    • PaxInVeritate
      Posted on August 7, 2012 at 9:49am

      LAMELIBERALS…
      Please provide a verifiable source for your assertion.

      Report Post » PaxInVeritate  
    • wbryers
      Posted on August 7, 2012 at 3:42pm

      As one of those “stupid or smug kids” I think you are being a closed minded bigot. We are normal, hard working Americans just like everyone else. If an employee was being rude to you, it‘s probably because you’re an ass.

      My store employs 60+ people. All men and women who get up every day and deal with ******** like you for 8 hours, then get to go home and pay bills we can barely afford.

      1. Amazon is taxed now. Go read a newspaper.
      2. We ship to your home for free too.
      3. If your product doesn’t work, we have a 30 day, no hassle warranty. Good luck dealing with amazon support.

      Get your facts straight before you make yourself sound like more of an idiot.

      Report Post »  
  • ohiowordguy
    Posted on August 6, 2012 at 10:07pm

    Stick a fork in Best Buy.

    Why drive there, pay more and deal with alternately mind-numbingly stupid or smug, snotty kids when you can get things cheaper, tax-free and shipped direct to your door by Amazon.

    I know a lot of folks (myself included) were upset by Bezos’ support for gay marriage, but let’s not forget Best Buy supports CAIR — that’s the deal-breaker for me.

    Report Post »  
  • Darmok and Jalad at Tanagra
    Posted on August 6, 2012 at 9:26pm

    I love Best Buy, I just went there today, had to buy a new harddrive for the laptop. A great store, and great employees. I love their warrantees and they always back up their products. I like to shop local, even if it’s a little more, that’s jobs and money that stays here in my town.

    Report Post » Darmok and Jalad at Tanagra  
    • Wolfgang the Gray
      Posted on August 6, 2012 at 10:35pm

      I used to shop at Best Buy all the time, but then I moved to Phoenix, AZ and discovered Fry’s Electronics. Their stores are huge (enough for 2-3 Best Buys to fit inside) and the selection there is incredible. I haven‘t shopped at Best Buy in well over a year because with Fry’s available, Best Buy is like an electronic 7-Eleven.

      Report Post » Wolfgang the Gray  
    • KenInIL
      Posted on August 6, 2012 at 11:03pm

      I like Best Buy, but since they went from Merry Christmas to Happy Holidays I shop at Fry’s !!

      Report Post »  
    • Darmok and Jalad at Tanagra
      Posted on August 6, 2012 at 11:23pm

      I love Fry’s, it is geek heaven. Back in the 90′s, I visited my folks down in Dallas, my wife and I were blown away by Fry’s and every time we visit my brother in Portland OR, I have to make a Fry’s visit. (Trivia Fact, Fry’s bought Tandy Corps failed attempt of Incredible Universe; that is where a majority of the stores came from) Unfortunately, they don’t have one near the Springs. Again, I just really like the customer service I get at Best Buy, but there are some smaller local places I do buy most my computer parts from, CompuXparts. They are online, a great computer shop.

      Report Post » Darmok and Jalad at Tanagra  
  • Individualism
    Posted on August 6, 2012 at 9:19pm

    Best Buy needs to live up to its name because normally its the opposite of best buy when its more expensive for the same supplies as other stores.

    Report Post » Individualism  
    • TomFerrari
      Posted on August 7, 2012 at 11:51am

      Now THERE’s a sensible response to the article! Thanks for the sanity.

      Without a “Bricks and Mortar” location to showcase their goods, the entire electronics industry will be harmed. We will all know about the newest iPad and the newest ultra-cool gadgets, but, we will NOT have the ability to view TV screens side-by-side. We will not be able to wander aisles and look at things we never knew existed, let alone wanted!

      Without a storefront, we will be relegated to shopping online – which is okay, but, you cannot test-drive online; you are limited in how to find items to buy, and then, you are only able to choose items based on the limited information available. Sure, you could go to a Wal-Mart or a Sears, but, you will find the 15 top selling low-end choices out of the hundreds or thousands that exist.

      Me? I WANT a Brick-and-Mortar place to shop.

      But… When I have to pay more there than online shipped home, no, I will make the actual purchase online.

      What to do?
      1) lean heavily on its suppliers to cut the margins due to the showcase/marketing a storefront provides.
      2) professional/polite employees cost no more than rude ones – ask Chick-Fil-A
      3) cut costs. You’re a showroom. BE ONE!
      a) Reduce inventory
      b) Ship to customer while beating online prices or at least match them.
      c) Charge extra for in-store pick-up convenience

      Peeve: I shop online at companies I TRUST! So don’t sell stuff on your site from other sellers!

      Report Post » TomFerrari  
  • GoodStuff
    Posted on August 6, 2012 at 9:10pm

    “It‘s the latest twist in the Minneapolis company’s struggles to stay relevant as more people buy electronics online.”

    Well, there’s the answer to their question. Just become an online retailer only. Get rid of the big box stores.

    Report Post »  
    • Buster_Highman
      Posted on August 6, 2012 at 11:26pm

      That’s not the answer. Many people want to see and touch a product before they pay for it.
      Best Buy’s problem is that their inventory is too diverse. Who still buys music in CD format? Who would go there for a refigerator? Many of their employees are unfriendly, unknowledgable turds who could care less if you get what you’re looking for. I‘ve had them tell me that they don’t carry a product, only to keep searching and find it myself. Come to think of it, that happens to me at HD and Wally too. They would do good to send all of their incompetent employees packing.

      Report Post »  
    • The Jewish Avenger
      Posted on August 7, 2012 at 8:17am

      There are so many factors on why a physical store needs to be near where you live but perosnally, I’m getting tired of finding something online and then call the store and they say they dont carry it.
      Electronics especially computers is a tricky game, you cant be clarivoiant enough to know what stock you need and within 2-6 months your stuff is obsolote… Best Buy’s biggest flaw? They stopped selling Verbatim medium. Other than that the rest is great.

      Report Post » The Jewish Avenger  
    • Ming The Merciless
      Posted on August 7, 2012 at 9:59am

      I buy 99% of my music on CD format. I love the CD format! Unfortunately Best Buy doesn’t carry alot of deep catalog titles that I like – they cater to the more ‘mainstream’ individual.

      I would like best Buy to carry indie label titles as well as Japan import titles (CD’s with the bonus tracks) – but I realize I’m in the minority with those wishes. So – I will continue ordering those titles online from Japan suppliers and bypass Best Buy or stores like that which sell CD’s.

      Report Post » Ming The Merciless  
    • wbryers
      Posted on August 7, 2012 at 3:46pm

      “Look I joined ‘The Blaze’! I love America!”

      Wants to close one of the largest retailers in the nation.

      Pick a side bro.

      Report Post »  
  • Chromo200
    Posted on August 6, 2012 at 9:08pm

    I still will boycott his stores ..

    Report Post »  
  • www.TopTheNews.com
    Posted on August 6, 2012 at 9:06pm

    Well, their debt just got downgraded to ‘junk’ on one side today if that gives you an idea of what their prospects look like…

    I have heard whispers about Amazon being interested in the retail space, but I don’t know how much sense that would make.

    Report Post » www.TopTheNews.com  
    • Ming The Merciless
      Posted on August 7, 2012 at 10:01am

      That’s an interesting idea about Amazon – but that would raise Amazon prices wouldn’t it?

      Report Post » Ming The Merciless  

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