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Best Buy Pops On Dubious Ex-Chairman $24-$26 Take Over Offer, To Drop Once Market Digest (Lack Of) Details

Tyler Durden's picture





 

The company which has lately is best known as Amazon's physical showroom, aka Best Buy, is in play once again, this time on yet another highly dubious speculation of a takeover by the company's founder, Richard Schulze, who has offered to take the company private at $24-26/share. So far so good. The problem: a highly confident letter by Credit Suisse meaning zero fixed financing is in place. Frankly, it is surprising Jefferies did not engage here, because as those who have observed the kinds of "weak" MBO offers as this one will certainly be, "highly confident" financings almost never work out, especially those which assume to refi $1.7 billion in debt for a distressed company. It gets better: Schulze has not even done due diligence for which he is asking the board's permission. Expect the initial pop on the headline to fizzle very quickly the realization that the probability of this deal actually happening is negligible (see every other "highly confident" take over by Trian's Nelson Peltz virtually all of which have fizzled in the past 3 years).

From Bloomberg:

Best Buy Co. founder Richard Schulze, who stepped down as chairman this year, offered to take the electronics retailer private at $24 to $26 a share, according to a copy of a letter he sent to the board today.

 

Credit Suisse Group AG, Schulze’s financial adviser, is confident it can obtain financing for an offer, according to a draft of the letter obtained by Bloomberg News. The midpoint of the range gives the company an equity value of $8.5 billion. Schulze, who held more than 20 percent of Best Buy as of June, plans to contribute $1 billion in equity from that stake, the letter shows.

 

The rest of the money will come from what the letter calls “premier private-equity firms with deep experience in retail who are interested in a possible acquisition of Best Buy” and debt financing. The Richfield, Minnesota-based electronics chain had about $1.7 billion in long-term debt as of May 5, according to regulatory filings.

 

“I have been actively exploring all available options for my ownership stake,” Schulze, 71, said in the letter. “That exploration has reinforced my belief that bold and extensive changes are needed for Best Buy to return to market leadership and has led me to the conclusion that the company’s best chance for renewed success will be to implement these changes under a different ownership structure.”

 

Best Buy shares rose 1.4 percent to $17.64 Aug. 3 in New York trading. Schulze’s offer would be at least 36 percent more than that closing price. Sue Busch, a spokeswoman for Best Buy, said she couldn’t immediately comment. Through a spokesman, Schulze declined to comment on the letter.

 

Schulze is seeking the board’s permission to conduct due diligence on the electronics retailer and form a group including private-equity funds and other executives that would make a more complete offer. Under Minnesota corporate law, Schulze needs permission from company directors to form such a group. His offer will have no deadline as yet, and it’s subject to being able to conduct due diligence.

 

“With the board’s agreement that I may work together with potential private equity partners and former senior executives, and with timely access to relevant non-public company information, I am confident that the necessary due diligence could be completed expeditiously and a binding agreement to acquire Best Buy could be reached quickly,” Schulze said. “I am prepared to enter into a customary confidentiality agreement and begin work immediately.”

 


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Mon, 08/06/2012 - 08:38 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

I've been to Best Buy lately.....take the money running.

 

Mon, 08/06/2012 - 13:21 | Link to Comment TruthInSunshine
TruthInSunshine's picture

Sears/Kmart, Best Buy, Radio Shack, JC Penny, Food Lion, Arby's, Brookstone & Omaha Steaks should merge, to be called FCFRG (FubarClusterFackle Retail Group).

It'd be an incredible retail tour de force bring massive synergies to the consumer landscape. The sell side anal-cysts could slather it with lipstick and mark that bitch up and sell it The Bernank!

Mon, 08/06/2012 - 08:43 | Link to Comment buzzsaw99
buzzsaw99's picture

If BBY went under I would consider it a terrible loss.

Mon, 08/06/2012 - 08:44 | Link to Comment Jim B
Jim B's picture

Pump and dump....  He still has stock to unload! 

Mon, 08/06/2012 - 15:05 | Link to Comment Larry Dallas
Larry Dallas's picture

Agreed. This guy is talking his book. Nothing here to see. Just selling the sizzle, not the steak.  

Retail is a dying breed. All electronics I bought and everone else I know has been though the interwebs.

Mon, 08/06/2012 - 09:02 | Link to Comment slaughterer
slaughterer's picture

Bye bye Best Buy.   --Love, Jeff B.

Mon, 08/06/2012 - 08:45 | Link to Comment Dr. Engali
Dr. Engali's picture

I like Best Buy but who in their right mind is going to fund a take over in these market conditions?

Mon, 08/06/2012 - 08:51 | Link to Comment SheepDog-One
SheepDog-One's picture

Sounds like a pump n dump to me, who in their right mind would pony up near a couple billion dollars to pay almost 40% more than present stock price? 

Mon, 08/06/2012 - 08:59 | Link to Comment The Wizard of Oz
The Wizard of Oz's picture

TURN ON THE FUN BITCHEZ!!!

Mon, 08/06/2012 - 09:03 | Link to Comment Haager
Haager's picture

Good tactics are priceless.

http://www.youtube.com/watch?v=YUhb0XII93I

Mon, 08/06/2012 - 09:54 | Link to Comment DavosSherman
DavosSherman's picture

God this world is just full of morons.  Good ridance Worst Buy and may Dick Schulze's ship of paper weath go down with it.

Mon, 08/06/2012 - 09:54 | Link to Comment Floodmaster
Floodmaster's picture

Privatization and corporate bonds make more sense than equities.

Mon, 08/06/2012 - 10:14 | Link to Comment otto skorzeny
otto skorzeny's picture

see alot of people walking out of BB with nothing in their hands-once and a while a kid w/ Call of Duty. of course they just opened an HH Gregg down the street and that place is a an absolute ghost town-I wondered at the time they were building it (ironically-in an old Circuit City building) at this time in history.

Mon, 08/06/2012 - 11:54 | Link to Comment hannah
hannah's picture

i can tell you how well they are doing...just look at their enventory. they have NONE. they dont have just in time...they have no inventory. i bought a 28" monitor from them and had to go to 4 stores to find one in stock. well they are selling out so fast you might say...no they just dont have the cash to keep inventory.

Mon, 08/06/2012 - 12:50 | Link to Comment GMadScientist
GMadScientist's picture

Does the putz have amnesia? Why can't he remember the state he left his own company in?!

Mon, 08/06/2012 - 20:06 | Link to Comment Neethgie
Neethgie's picture

best buy bombed here in the uk and i remember why. I went into a warehouse basically filled with electronic goods, at each section there were lots of staff trying to sell me very reasonably priced items, however the amount of staff was ridiculous, who the fuck pays a guy to check reciepts?!?!? honestly if they cut the workforce down to a third it would still be overstaffed yet effective. people dont just stroll upto beaten up stocks and offer over the odd's prices to delist them, it just aint gonna happen.

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