My crystal ball is just as cloudy as anyone else's, but I still cannot see the end game for why Richard Schulze wants to purchase the ailing big box giant and return it to privately held company.

Since they overtook Circuit City in the late 1990s as the nation's largest a/v chain, Best Buy has been a hot button topic for the entire industry for many years. We watched and discussed the acquisitions of AudioVisions and Magnolia and the company's desire to push into a premium showroom model in many markets and a stronger desire to get into the realm of 'custom' a/v work instead of delivery and setup. We watched and discussed the acquisition of GeekSquad and the strong push to build a service model. We have seen the ups and downs of the experiments in other categories (I remember when my local store added musical instruments for a while). We watched and discussed the Best Buy for Business campaign, with some limited success reported for some members in using them as a supplier. We have seen dozens of threads on sites like ours and RemoteCentral of "OMG, Magnolia will have (xxx) product line, what are these vendors thinking!!!". And of course we have seen the store closings and the big scandal within the last couple years.

I still feel that a strong Best Buy actually helps the independent specialist and the smaller regional chain retailers. It should not be an 'us against them' mentality. They bring a lot of market awareness to the markets they serve, and they are fairly easy to sell against.

Either way, it's never boring...

-Rick

http://www.startribune.com/business/...1.html?refer=y


Quote Originally Posted by StarTribune article
Best Buy Co. Inc. founder Richard Schulze will need at least one more month to prepare his offer to buy the company, the Star Tribune has learned.
Quote Originally Posted by StarTribune article
Schulze and his potential investors are reviewing Best Buy's financial data, but discussions are "going very well," and Schulze remains "highly confident" he can raise the $10 billion it will likely take to acquire the consumer electronics giant, according to a source close to Schulze.
In late August, when Schulze and Best Buy agreed on a process for reviewing the company's financial records, Schulze had hoped to make an offer within a week after the review was complete. But the company only opened its "data room" to Schulze's advisers around mid-September, according to the source close to Schulze, who requested anonymity because of the confidential and sensitive nature of the negotiations.
According to the agreement with Best Buy, Schulze has 60 days from the time the company opens its data room to present an official buyout offer to the board of directors. That means Schulze's deadline would fall in mid-November.
Schulze had previously suggested that his group would pay between $24 and $26 a share for Best Buy, which represents a premium of 36 to 48 percent over the company's closing price of $17.58 Thursday. According to various estimates, Schulze would need to raise around $6 million from the debt markets and $2 billion to $3 billion from equity investors.
Analysts think that Schulze, who has so far only committed $1 billion from his 20 percent stake in Best Buy, will need to offer more of his own cash to finance the deal.
The confidentiality agreement between Schulze and Best Buy covers "six equity financing sources," the four private equity firms and two unknown parties. One group, private equity giant Kohlberg Kravis Roberts (KKR), dropped out of the talks, according to some reports, though the source close to Schulze said all six firms remain interested, including KKR, Apollo Global Management, Leonard Greene, and Texas Pacific Group.
$1B for overseas assets?

Best Buy's international assets, which include stores in Europe, China, Mexico and Canada, could be critical in Schulze's takeover bid, analysts said. Should Schulze and his investors acquire the company, they could easily fetch $1 billion by selling European and Chinese assets and use the proceeds to pay down buyout-related debt, said David Strasser, an analyst with Janney Capital Management.
"I think [international] makes the deal much more attractive," Strasser said.
The source close to Schulze said the group currently has no plans to sell international, though he cautioned that events remain fluid and could suddenly change.
Still, analysts say Best Buy's current leadership could very well end up selling the overseas assets, especially the company's well-regarded Five Star chain in China. A few years ago, former Best Buy International CEO Robert Willett offered to purchase Five Star from the company under former CEO Brian Dunn, according to the source close to Schulze.
Current Best Buy CEO Hubert Joly doesn't seem particularly attached to the retailer's global business, a stark contrast to Dunn, who had touted overseas expansion, especially in China, as a key part of the company's long-term growth prospects.
"One of the key strategic questions is what is the purpose of being global?" Joly told the Star Tribune in a recent interview. "Retailing is not necessarily a global business. Is being global or multinational a strategic advantage or is it just a collection of countries?"
"I am going to take my time to study this," Joly continued. "I would be surprised if my primary focus won't be on the U.S. business. It's by far the biggest. We will, over time, take a look at international and what we will do with it."
Thomas Lee • 612-673-4113