US consumer electronics retailer Best Buy Co Inc (NYSE:BBY) said its board had offered founder and shareholder Richard Schulze to carry out due diligence with the view of making a firm offer to buy the company, but he had refused to accept it.
Schulze, controlling 20.1% in Best Buy, made earlier in August a proposal to take the company private for a price of between USD24.00 (EUR19.50) and USD26.00 a share, asking to be allowed to conduct due diligence.
Now, the Best Buy board said it had mandated its advisors to start talks with Schulze with the aim of establishing an orderly process that would allow the buyer to gain access to certain financial, operational and legal information, enabling him to continue negotiating with his private equity partners and debt financing sources, as he requested.
The board said its proposal would have given Schulze a waiver of Minnesota law in order to facilitate him the ability to work with his private equity partners towards a definitive proposal, due diligence access for him and his partners and a 60-day period to come up with a fully-financed offer. In exchange, the Best Buy board asked the buyer to accept certain terms aimed at protecting the company and its stockholders and limit outside distraction, without elaborating on these conditions. Schulze turned down the proposal.
The company board said Schulze’s letter from 6 August had proposed a highly conditional deal, providing insufficient information for the directors to be able to form a reasonable opinion on his offer. The bidder has failed to disclose its financing and equity partners, the board explained.
In his letter, Schulze said he had talked with top buyout firms interested in taking part in a deal, as well as with former Best Buy senior executives and put together a business plan addressing the problems currently faced by the company.
The buyout would be financed with funds from private equity firms, around USD1bn of equity investment by Schulze and debt financing, which his advisor Credit Suisse Group AG (NYSE:CS) assured it can be arranged, the founder said.
According to Schulze, Best Buy would benefit from being taken private by eliminating the market and execution risk for shareholders associated with a turnaround under an interim CEO.
The offered price per share values Best Buy at over USD8bn, Reuters said.