In a highly publicized effort, former Best Buy Chairman Richard Schulze had been trying for months to cobble together a deal to obtain control of the company he founded, but his efforts collapsed Thursday, as did his effort to return to the board of directors.
“This is how the deal ends. Not with a bang, but with a whimper,” Erik Gordon, a business and law professor at the University of Michigan in Ann Arbor, told Bloomberg. “Schulze never made a compelling case for going private.”
Thursday was Schulze's deadline to make a formal offer to buy the Minnesota-based company, but negotiations fizzled. Instead, at least two private equity groups that had been expected to partner with Schulze made offers for the company separately from Schulze, the Star Tribune reports. It wasn't clear why Schulze was not part of those bids, the newspaper reported.
Best Buy on Friday is expected to offer a final update on the failed negotiations as part of a quarterly earnings report. Schulze has not commented since Thursday.
In the end, Schulze and three firms, Cerberus Capital Management, Leonard Green & Partners and TPG Capital, had tried to put together a deal to buy a bigger stake in Best Buy that would have added to Schulze's roughly 20 percent stake, the New York Times reported. However, any genuine prospects for a takeover disappeared several weeks ago when the investor consortium decided it did not have the appetite for the debt in the leveraged buyout bid, the Times reported.
Schulze and the firms were proposing to take a minority stake in Best Buy in exchange for three seats on the board, the Wall Street Journal reported. The three private-equity firms had been talking about obtaining a stake of between $400 million and $700 million, which would have been separate from the 20 percent stake Schulze owns in the company, the Journal reported.
Best Buy shares have tumbled more than 11 percent since news first surfaced last June that Schulze was interested in a potential takeover, the New York Times noted.
Schulze, who launched the electronics retailing empire with a single St. Paul store in 1966, was forced to resign from the board last spring as the company staggered amid decreased sales and a tumbling stock price. But he almost immediately hatched a high-stakes plot to regain control. The Wall Street Journal has an interactive timeline of the company and the deal.
Hubert Joly joined the company as its new CEO in September.
One source told the Star Tribune that while a significant chapter in the company's turbulent recent history has now concluded, Schulze could always seek other opportunities to buy the company or gain control of the board.
“The journey is still starting,” the source told the newspaper.
Richfield-based Best Buy has 160,000 employees, including about 8,000 in Minnesota.