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Best Buy founder and former CEO Richard Schulze repeated his call for the company to release financial information to him so he can pursue his attempt to acquire it.
"You should know that I am not going away," he told board members in a letter released Thursday.
Schulze reaffirmed his intentions, first disclosed Aug. 6, to buy Best Buy for as much as $8.8 billion. Schulze already holds a 21 percent stake in the company. Analysts estimate he would need to secure $3 billion to $4 billion from private equity investors and the rest from lenders to take Best Buy private.
The financial and legal hurdles have led some investors to question whether Schulze can pull a deal together for the world's largest consumer electronics retailer. The board hasn't given him permission to form a buyout group as required by Minnesota law, nor has it allowed Schulze to examine Best Buy's finances.
State law prevents a person who owns 20 percent or more of a company's shares from voting those shares in a transaction without board or shareholder approval. Glenn Gurtcheff, a merger and acquisitions banker who manages Harris Williams' Minneapolis office, said the law is "a pain" for anyone eyeing an unsolicited bid.
"[But] it's not insurmountable," Gurtcheff said, adding that the law was designed to keep insiders at public companies from taking advantage of outside shareholders.
Besides the law, analysts say the more compelling question is how much debt and private equity Schulze needs to take the company private. To pin that down, Schulze and various bankers will want to know the details of Best Buy's debt load, Gurtcheff said.
Schulze's transformation in recent months from company chairman to unsolicited bidder has played out in dramatic and sudden turns. The saga began with the departure of CEO Brian Dunn, who abruptly resigned in April amid allegations he had an affair with a female employee. Schulze lost his chairman title after acknowledging that he failed to inform the board of those allegations.
When Schulze resigned in early June, speculation began building that he was planning a takeover bid for the company he started with a single St. Paul music store in 1966.
Best Buy, which has 7,500 Minnesota employees, has struggled to grow sales as more shoppers use its stores to window shop, then buy at competitors such as Wal-Mart and Amazon.com. In response, Best Buy has sought to cut $800 million in costs over three years, mostly by closing 50 stores.
But Schulze says he knows how to turn Best Buy around and has formed a leadership team led by former CEO Brad Anderson. In his letter Thursday, Schulze told the company's board that he has a group of private equity companies lined up to help bankroll his purchase.
"A number of leading private equity firms have informed me that they are prepared to make significant commitments, subject to due diligence," Schulze wrote. The Star Tribune reported last week that the private equity backers included KKR Co., Leonard Green Partners, TPG Capital and Apollo Global Management.
Schulze also expressed frustration that Best Buy officials had refused to let him examine its financials. "I am deeply concerned about the direction of the company and, as Best Buy's largest shareholder, I cannot simply stand aside."
The company countered with a statement of its own Thursday. "As stated in our Aug. 6 response to Mr. Schulze's letter requesting due diligence and outlining [an unsolicited offer of $8.8 billion], ... Best Buy's Board of Directors will review and consider the letter in due course."
Analysts said Schulze is wise to insist on the board's involvement to avoid possible complications over Minnesota's takeover law. Under that law, so-called "insider shareholders" like Schulze cannot "combine" with outside groups unless the combination is first approved by a committee of "disinterested directors."
If Schulze formally enters into an agreement with an outside investor, that would start the clock ticking on Minnesota's formal approval process. If that approval process starts, and if committee approval is not obtained, then Schulze would have to wait four years before trying to edge out remaining shareholders.
"Any bidder has obstacles," said Steven Davidoff, an acquisitions expert who teaches corporate law at Ohio State University's law school. "But the question really is, can [Schulze] put together a compelling bid that forces the board to meet with him."
Late Thursday, a source close to the company said, "Minnesota law does not prevent Mr. Schulze from further exploring and engaging in discussions with his private equity partners, and ... he does not need the consent of Best Buy's board of directors to bring forward a definitive proposal that names them."
Best Buy is scheduled to report quarterly earnings Tuesday, and investors will be looking for more details about the company's turnaround plan.
Schulze initially proposed an offer of $24 to $26 a share. While that's a significant return for a stock that has been trading below $20 in recent weeks, some analysts believe Schulze and his partners need to go higher, perhaps $30 a share, to secure a sale.
Schulze's financing "is a very big hurdle," Davidoff said. "He has some money but not enough. The question is, can he solidify that?"
Best Buy shares rose 5.4 percent Thursday to $20.41 -- the highest close since Schulze's Aug. 6 announcement.
Some private equity firms have plenty of acquisition money left over from earlier fundraising campaigns. They may be willing to invest in a Best Buy deal with a founder determined to turn around its fortunes.
Schulze's past success with Best Buy will be critical as he tries to attract investors, said Chris Puto, dean of the University of St. Thomas Business School. "There are likely to be investors who will agree that if something is achievable, [Schulze] can achieve it."