Best Buy Founder Slams Company In Letter To Board3:17 PM EST Thu. Aug. 16, 2012
Best Buy's founder and former chairman has officially asked the big box retailer's board of directors for permission to form a group to buy the company, reportedly with the intent of taking it private.
Richard Schulze, who resigned from the company in May, made public a scathing letter Thursday addressed to the board in which he accuses the board of dismissing his previous notices to acquire the company for between $24 and $26 per share.
Best Buy shares were trading at $19.90 Thursday afternoon, up 53 cents or 2.7 percent, after the letter was released.
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"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. As such, the board has a duty to ensure it is fully informed about all available options as it seeks to achieve the best outcome for Best Buy and its shareholders," Schulze wrote to open his letter.
He wrote that the board "dismissed my carefully considered proposal" and that he would have preferred a constructive private dialogue with the board.
"I am deeply concerned about the direction of the company and, as Best Buy's largest shareholder, I cannot simply stand aside. I still hope to work with the board on a mutually beneficial transaction -- but you should know that I am not going away," Schulze wrote in the letter.
Schulze originally expressed interest in taking over Best Buy in late July, when he was reportedly recruiting executives to join him in a takeover bid.
In the letter, Schulze outlines a proposal that combines the use of private equity investment, his own money and debt financing necessary to buy Best Buy. He reportedly owns about 20 percent of the company now.
"A number of leading private equity firms have informed me that they are prepared to make significant commitments, subject to due diligence. I am prepared to roll over into this transaction at least $1 billion of my own equity -- and potentially all of my existing stake depending on the ultimate terms of the agreements with the private equity firms regarding the new ownership structure," Schulze wrote in the letter.
NEXT: Best Buy's Response
But Best Buy isn't moving quickly because it wants Schulze to name his private equity partners, according to Reuters.
In the letter, Schulze said Credit Suisse is confident it can arrange debt financing and added that "a number of major banks have contacted Credit Suisse to express their interest in participating in the debt financing."
Schulze also wrote that Best Buy has seen its culture and values erode and that his group, which includes former CEO Brad Anderson and former president and COO Allen Lenzmeier, can reinvigorate the company.
"I believe bold and fundamental changes are needed to return Best Buy to market leadership, and I have done extensive work to develop a plan focused on renewed growth and increased efficiency to address Best Buy's challenges," Schulze wrote. "This team has a history of successfully growing and reinventing Best Buy in response to ever-changing industry conditions. I have shared this plan in depth with the private equity firms prepared to partner with me -- and they believe it is the right plan and the right leadership."
Earlier this year, Best Buy said it planned to close 50 stores in the U.S. and lay off 400 employees.
In a statement, Best Buy said its board would review and consider Schulze's letter "outlining a highly conditional unsolicited indication of interest."
Best Buy also noted that Minnesota law does not prevent Schulze from "further exploring and engaging in discussions with his private equity partners, and he does not need the consent of Best Buy's board of directors to bring forward a proposal that names them."
PUBLISHED AUG. 16, 2012