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Best Buy Founder Delays Buyout Bid, Stock Tumbles

14 Dec, 2012 By: Erik Gruenwedel

Best Buy founder and former chairman Richard Schulze told the consumer electronics retail chain’s board Dec. 14 that he would submit his bid to take the chain private after the holiday and fiscal year-end, according to a regulatory filing.

Schulze and Best Buy’s board formally amended terms of an Aug. 26 agreement, which gave the founder access to certain due diligence material, to allow Schulze to submit his bid from Feb. 1 to Feb. 28.

“Both parties believe that allowing Mr. Schulze to bring his offer after the holiday season and fiscal year-end is in the best interests of shareholders and provides Mr. Schulze and his potential partners with an opportunity to include the company's full year results as part of their due diligence review,” Best Buy said in a statement.

The retailer said its board would have 30 days to review and take a position on any such offer, consistent with its fiduciary duties and in the best interests of shareholders.

"There is no guarantee that Mr. Schulze will present an offer or that such an offer would be accepted by the board,” Best Buy said.

That language, combined with Schulze’s delay, erased Best Buy share gains from the previous day when a newspaper reported that the former chairman would submit a bid by the end of the week.

Indeed, Yahoo Finance host Aaron Task said Best Buy is "falling off a cliff" as it weathers changing consumer buying habits, e-commerce competition, management changes and a third-quarter loss of $10 million.

“The board has mishandled [Schulze’s initial bid] from the jump,” Task said. “They’ve really done a disservice to shareholders.”

Should Best Buy’s fourth-quarter results disappoint, Task and co-host Jeff Macke said Schulze's private equity backers could push back an offer until the spring or later when shares have sunk even lower in value.

“The backers have no emotional involvement here,” Macke said. “They’re going to say, ‘what is the cheapest price we can get? What’s the value here?' And it looks to me the value is a lot lower [than] where he’s allegedly bidding right now.”

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