Best Buy gains on report Schulze bid progressing
NEW YORK (AP) — Best Buy Co.'s shares climbed Wednesday because of a report indicating that its founder and former chairman Richard Schulze is making some headway with his potential buyout offer of the electronics retailer.
THE SPARK: A Reuters story on Wednesday said at least four private equity firms are evaluating Best Buy's financials, a key step before any definitive offer. The story, citing unnamed people familiar with the matter, said the private equity firms include Apollo Global Management, Cerberus Capital Management, TPG Capital and Leonard Green & Partners.
Best Buy and two of the investor firms did not return requests for comment. Schulze, Apollo and TPG declined to comment.
THE BIG PICTURE: In late August, Best Buy agreed to let Richard Schulze and potential buyout partners examine its books. He already owns 20 percent of the Minneapolis retailer's stock, and has suggested that he could pay $24 to $26 per share for the chain.
With a new CEO, turnaround expert Hubert Joly, Best Buy is trying to reverse recent business declines as competition increases and consumers' buying habits change. Best Buy's stores are becoming unprofitable as customers increasingly use them to browse for electronics, then buy them cheaper online. On top of that, shoppers are no longer snapping up big TVs and computers at a fast clip like they used to, instead opting for smaller gadgets like cell phones and tablets.
The company has also suffered abrupt management changes. Former CEO Brian Dunn left in April amid a company investigation into an "improper relationship" with a 29-year-old female employee. Schulze resigned as chairman a month later after the probe found that he knew about the relationship and failed to alert the board or human resources.
SHARE ACTION: Shares rose 67 cents, or 4 percent, to $17.64 in afternoon trading. The stock had dropped 27 percent this year.