Best Buy founder Richard Schulze have reached an agreement that allows him to conduct due diligence and form an investment group to make an official bid for the struggling electronics retailer and take it private.
After the due diligence process begins, Schulze will have 60 days in which to bring a fully financed, definitive proposal for the company, the Richfield, Minn.-based company said in a statement today. If the board of directors rejects that offer, Schulze has agreed not to pursue another proposal until January.
But Schulze would also have an opportunity to present an offer to shareholders at the company's annual meeting in January. If both attempts were to fail, Schulze has agreed not to pursue another bid for the company for a full year.
Schulze, who founded Best Buy in 1966 and served as the company's CEO until 2002, still owns 20 percent of the company. He has proposed paying between $24 and $26 per share in cash to the company to acquire the outstanding shares he doesn't own -- a premium of 36 percent to 47 percent over today's closing price of $17.87.
Schulze told the board earlier this month in a letter that he would pay up to $8.8 billion for the big-box electronics chain, saying he was "deeply concerned about the direction of the company."
"As Best Buy's largest shareholder, I cannot simply stand aside," he said in the letter. "I still hope to work with the board on a mutually beneficial transaction -- but you should know that I am not going away."
In that letter, Schulze asked the board for permission to form a group of investors to buy the company and to perform the due diligence. The board granted the request today.
Schulze stepped down as chairman earlier this year after getting caught up in a scandal involving former CEO Brian Dunn. A Best Buy investigation found that Dunn had engaged in an "extremely close personal relationship with a female employee that negatively impacted the work environment."
After that relationship was discovered, Dunn was asked to resign as chairman. During its investigation, the audit committee found that Schulze had learned of the relationship but didn't inform anyone, prompting the board to ask him to step down.
With more than 1,400 stores, the company has been struggling to compete with online retailers. For the previous fiscal year, the company posted a loss of $1.2 billion for its last fiscal year, which ended March 31, compared with a $1.3 billion profit for the previous year.