Best Buy Founder Looking to Take CE Retailer Private

26 Jun, 2012 By: Erik Gruenwedel

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Best Buy founder Richard Schulze is reportedly shopping around a possible leveraged buyout of the Minneapolis-based consumer electronics chain.

Schulze, who resigned his chairman position earlier this year after being rebuked by the board for failing to disclose knowledge of improper conduct by former CEO Brian Dunn, owns a 20.1% stake in Best Buy.

The Wall Street Journal reported Schulze is in discussions with Credit Suisse about the buyout, which would take Best Buy private with the belief that austere cost cutting and alternative operating strategies could make the chain a prized third-party acquisition.

“[Schulze] must think so,” said Michael Pachter, analyst with Wedbush Securities in Los Angeles, in an email. “I think he will have a tough time borrowing the money.”

While no deal is in place or immediately forthcoming, Best Buy represents a conundrum to investors in that it is profitable while operating in a market that is increasingly price-sensitive and ultra competitive.

In fact, many analysts contend Best Buy has become nothing more than a consumer electronics showroom for cheaper alternatives such as Amazon and other e-commerce sites.

“Best Buy faces headwinds around same-store sales, market share and competition that are more pronounced than for other retailers with similar leverage,” Fitch analysts Kellie Geressy-Nilsen and Monica Aggarwal wrote in a June 13 note discussing the specter of a buyout.

Best Buy is currently headed by interim CEO Mike Mikan, who has pledged to right the retailer. In a June 21 shareholders meeting, the CEO acknowledged Best Buy is operating below expectations. 

Best Buy shares closed June 26 up 4.65% to $19.37 per share.
 

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