Best Buy founder makes offer to take the company private

In an effort to return Best Buy back to its previous status of being a private company, Best Buy founder Richard Schulze, who stepped down as company chairman two months ago, has submitted a proposal to purchase the retail leader. The proposal follows previous reports that Schulze was considering purchasing the company, which has been severely impacted by the growth of e-commerce.

According to a report by Jeffrey McCracken and Chris Burritt of Bloomberg, Schulze submitted his proposal and will offer stockholders between $24 to $26 for each share of Best Buy stock; this represents a significant premium for shares that closed at $17.64 on Friday. Since Schulze's proposal announcement, however, shares of the company have skyrocketed nearly 20 percent. Schulze currently already owns 20 percent of the company's stock.

Schulze's proposal letter also states that former CEO Brad Anderson and former President and COO Allen Lenzmeier could rejoin the company if the purchase is successful. In his letter, Schulze cited the company's poor performance and lack of leadership as his primary reason for wanting to purchase the company.

"I have been actively exploring all available options for my ownership stake," Schulze 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."

The Best Buy founder has been attempting to purchase the company he founded for several weeks, although the Best Buy board asked him to postpone his efforts to allow the company to search for a new CEO to replace Brian Dunn, who resigned in April. An independent investigation found Dunn had an inappropriate relationship with an employee – something the investigation said Schulze was aware of at the time but failed to report.

Best Buy has been in financial turmoil recently; the company laid off 2,400 employees just last month and posted an annual loss last year for the first time in its history.

Source: Bloomberg

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14 Comments

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They'd have to really **** up to post an annual lost - clearly they've just abandoned watching profit margins *shrugs*. One store I get, a handful of stores I get - but a whole company?

Then again, they did also have to post a gigantic loss on their failure in the UK which probably didn't help things - and that coupled with taking over 1/2bn hit on buying out CPW's half of their partnership (http://www.bbc.co.uk/news/business-15616445) probably contributed largely to their first ever annual loss.

As the article says there's been a clear lack of proper management at the executive level and it shows like a sore thumb. Sad really. I feel sorry for the sales teams working their asses off to hit sales targets - hard work for no point.

Honestly, I can't see them lasting to the next decade. Why is anyone going to pay MSRP for products when they can be found online for 10-50% less? COD MW3 (original) is 43.99 for the PS3 version on Amazon vs 59.99 at Best Buy.

Brandon said,
Honestly, I can't see them lasting to the next decade. Why is anyone going to pay MSRP for products when they can be found online for 10-50% less? COD MW3 (original) is 43.99 for the PS3 version on Amazon vs 59.99 at Best Buy.

To be fair, a temporary sale isn't a fair comparison. Two weeks ago, it was $34.99 at Best Buy.

Disclosure: I work at Best Buy.

I'm no fan of Best Buy but I hope they get back on their feet. Sometimes their pricing is a bit absurd but you can still catch good sales from time to time. Also, there's still a significant portion of consumers that like to get hands-on before they buy. For example, I checked out my plasma TV in person before I purchased it. Yeah, I read online reviews and I know that's probably the best indicator of quality, but I want to buy a TV that looks good to my me because I'm the one that has to live with it. I can't do that sort of comparison shopping online. So hopefully Best Buy shrinks but doesn't disappear.

Circuit City closed all it's stores a few years back, I think Best Buy still has a chance to survive
too much saturation as they have too many stores,

xpablo said,
Circuit City closed all it's stores a few years back, I think Best Buy still has a chance to survive
too much saturation as they have too many stores,

yup circuit city closed and so did comp usa.

if best buy goes under that pretty much screws us here in the US because there really is no competition anymore. i don't count the very few mom & pop shops either as they up charge the living heck out of items.

smooth3006 said,
if best buy goes under that pretty much screws us here in the US because there really is no competition anymore. i don't count the very few mom & pop shops either as they up charge the living heck out of items.

exactly. what brick & mortar tech store will we be left with if they close?

A few years back in the day, a store like Best Buy called Silo. It didn't last. Montgomery Wards Electric Avenue didn't last either. But Best Buy has been kicked butt since day one.

I am curious as to what happened? What retailer is killing Best Buy because it can't Wal-Mart because they don't sell enough high class electronics. I think Best Buy is losing business to online sales, because you don't have to pay taxes. However, once the bills in each state is past forcing online retailers to charge tax, then Best Buy could get fame back as buying local will be a better option.

TechieXP said,
A few years back in the day, a store like Best Buy called Silo. It didn't last. Montgomery Wards Electric Avenue didn't last either. But Best Buy has been kicked butt since day one.

I am curious as to what happened? What retailer is killing Best Buy because it can't Wal-Mart because they don't sell enough high class electronics. I think Best Buy is losing business to online sales, because you don't have to pay taxes. However, once the bills in each state is past forcing online retailers to charge tax, then Best Buy could get fame back as buying local will be a better option.

As much as I liked the no tax on online sales, I wish they'd just tax the darn thing already sales wise... I've been watching too many local small businesses get killed by places like amazon, crutchfield, etc... they just cant complete with the price and free shipping in most cases when its an expensive item...

TechieXP said,
A few years back in the day, a store like Best Buy called Silo. It didn't last. Montgomery Wards Electric Avenue didn't last either. But Best Buy has been kicked butt since day one.

I am curious as to what happened? What retailer is killing Best Buy because it can't Wal-Mart because they don't sell enough high class electronics. I think Best Buy is losing business to online sales, because you don't have to pay taxes. However, once the bills in each state is past forcing online retailers to charge tax, then Best Buy could get fame back as buying local will be a better option.

Nothing happened in retail accept online purchases are taking over everything. Best Buy is bleeding money because of it's retail centric nature not because of competition in physical stores.

Any large retail store that has huge over head of in store employee's and physical retail space to rent is going to be hurting or already is.

It is kind of a bummer but as a consumer my goal is to get the best price for the same item and that is usually online.

neufuse said,

As much as I liked the no tax on online sales, I wish they'd just tax the darn thing already sales wise... I've been watching too many local small businesses get killed by places like amazon, crutchfield, etc... they just cant complete with the price and free shipping in most cases when its an expensive item...

I agree. I don't like to pay more and I'm willing to bet that most people don't, but I don't see any reason why online stores shouldn't charge tax. It'd be a relatively small dent to a company's profit (assuming the company was already financial stable) and the country could really use the tax revenue lol.

TechieXP said,
A few years back in the day, a store like Best Buy called Silo. It didn't last. Montgomery Wards Electric Avenue didn't last either. But Best Buy has been kicked butt since day one.

I am curious as to what happened? What retailer is killing Best Buy because it can't Wal-Mart because they don't sell enough high class electronics. I think Best Buy is losing business to online sales, because you don't have to pay taxes. However, once the bills in each state is past forcing online retailers to charge tax, then Best Buy could get fame back as buying local will be a better option.

There's actually no retailer killing Best Buy - they're doing it to themselves. They mark up products that are not restricted to a price range around the MSRP, and they mark those products up a lot.

For example, a regular 3 foot sata cord will run you $30 if you buy it there. I tried to do some fishing around and I couldn't find a single retailer that grossly overpriced the cable as much as Best Buy did (I wrote a lengthy blog about this)

There's only a few items in the store that are not marked up - video games and some laptops being among them. Add to this that BB employees in certain stores are taught to "pretend" to check for better prices online from a website in store (this website not being linked to the internet - Google this for more information), and you have a recipe for fail.

To be honest, Best Buy only ever had success in areas where there were no other options.