Speculation on Schulze takeover bid boosts Best Buy

  • Article by: ADAM BELZ , Star Tribune
  • Updated: July 2, 2012 - 9:14 PM

Shares rose as much as 10 percent as the retailer's ex-chairman is rumored to be close to making an offer to buy business he founded.

Richard Schulze
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Richard Schulze

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Best Buy stock shot up Monday on heightened speculation that founder and former chairman Richard Schulze is close to making a buyout offer for the company.

The Richfield-based retailer's stock rose as much as 10 percent in early trading and held onto a 6 percent gain on the day, to close at $22.20 a share, up $1.24.

"There's just a lot of folks that are getting a little more optimistic that perhaps Schulze is going to find some interested partners to pair up and buy the thing," said Matt Arnold, an analyst with Edward Jones in St. Louis.

Shares in Best Buy, which have faced increased pressure from Internet rivals such as Amazon, fell as much as 23 percent this year, hitting bottom in May at $18.02 a share after CEO Brian Dunn resigned. Schulze lost the chairman title after a board committee determined he failed to inform the full board about allegations that Dunn had been engaged in an improper relationship with a female employee.

Schulze resigned from the board in June and said he was exploring options for his ownership stake.

The company's stock has gradually recovered, and Monday's spike came two days after the Star Tribune reported Schulze might attempt a takeover as early as this week.

After early trading sent the stock up 10 percent, Reuters reported a Schulze buyout is not imminent, taking away some of the stock's momentum.

"The stock then gives back half its gains, and it's a roller-coaster," said Colin McGranahan, an analyst with Sanford & Bernstein in New York. "It's a low-volume trading week as it is, so whatever's going to happen is going to be pronounced."

Best Buy's post-Schulze board appears to be bracing itself for a buyout attempt. It decided in June to collectively pay the company's four top executives $2 million in cash to cement their ties to the consumer electronics retailer.

Classic takeover defense

Also, after the annual shareholders meeting, the board approved a change to its bylaws to require an investor to hold at least 25 percent of the stock to call a special shareholders meeting to discuss such a buyout. Schulze owns about 21 percent of the company.

Experts called the move a classic takeover defense, designed specifically to impede Schulze. But it may not stop him. Schulze can easily arrange an informal gathering of sorts with top shareholders to hear his pitch. Analysts think if Schulze offered $30 a share he could buy the company, but he will more likely offer somewhere between $25 and $30.

Trading was heavy on Monday with about 36 million shares changing hands -- compared with an average daily volume of 9 million shares.

Adam Belz • 612-673-4405

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Richard Schulze