Best Buy's decision to delay earnings call fuels buyout speculation

  • Article by: THOMAS LEE , Star Tribune
  • Updated: February 27, 2013 - 8:41 PM

Delay of earnings call leads to speculation of imminent Schulze bid.

Richard Schulze
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Richard Schulze

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With Best Buy founder Richard Schulze facing a deadline Thursday to submit a bid to acquire the retailer, some investors wonder if the company’s last-minute decision to push its earnings announcement back a day means an offer is imminent.

Richfield-based Best Buy Co. Inc. had long planned to release fourth-quarter and fiscal 2013 earnings on Thursday, which also happens to be the last day Schulze can make a buyout offer this year. But in a surprise move Tuesday, Best Buy said it will now report financial results on Friday, to give Schulze the full 24 hours to make a bid.

“Our decision to move our earnings call to before the market opens on Friday, March 1, was solely to allow for the expiration of the period of time Mr. Schulze has to respond to the company,” spokeswoman Amy von Walter said.

But some analysts and investors say the delay may suggest Schulze and his private equity partners will, indeed, make an offer.

“Maybe [the company] knows that Dick will have something to say,” said Colin McGranahan, a retail analyst with Sanford Bernstein & Co. “That there is some chance he will put in a bid and they didn’t want that to overshadow the earnings announcement.”

But not all analysts are convinced the postponement means anything. Some don’t think Schulze will make an offer.

“I don’t think anything is going to happen,” said David Strasser, a retail analyst with Janney Capital Management.

A source close to Schulze recently told the Star Tribune that the founder planned to submit some sort of offer; options include a buyout bid or partnering with another investor to boost his 20 percent stake in the company.

“It’s all there,” the source said. “The lawyers are just working on the details. There are just bits and pieces left.”

In any case, neither Schulze nor the company necessarily have to say anything on Thursday. The Securities and Exchange Commission’s disclosure rules are unclear on whether the company or Schulze are legally obligated to disclose an offer or lack of one. Best Buy CEO Hubert Joly, though, will likely face questions about Schulze during the conference call Friday.

In May, the Best Buy board forced Schulze to resign as chairman after it determined the founder withheld information about allegations that then-CEO Brian Dunn had an affair with a female employee. Soon after, Schulze said he wanted to acquire the company and enlisted former CEO Brad Anderson and former president Al Lenzmeier to help him. He also recruited a group of private equity firms to finance the deal, including Texas Pacific Capital, Leonard Greene & Partners and Cerberus Capital Management.

Since joining the company in September, Joly has worked hard to improve Best Buy’s relationship with Schulze, who said the company needed better leadership when he began his pursuit of the company. Joly had arranged for Schulze’s buyout team to speak to executives throughout the company. Joly also kept Schulze updated about key hires, including Sharon McCollam as chief financial officer and Shawn Score as U.S. retail chief.

Still, analysts and corporate governance experts say Best Buy’s 11th-hour earnings call change is highly unusual. Companies set the date for earnings releases and conference calls, routine but crucial events, months if not a year in advance. The calls also don’t usually fall on a Friday or Monday.

The call also represents the first time Wall Street can fully size up Joly, who has been on the job only a few months. Throwing a last-minute curve is not the best way to win over Wall Street, which does not like surprises, analysts say.

“With a new CEO, we don’t know what to expect,” McGranahan said.

Still, postponing an earnings date, while rare, can happen. But what makes Best Buy’s situation so unusual is that the company had ample time to change the date before this week. In mid-December, Schulze and the company agreed to extend the buyout deadline to Feb. 28. In other words, Best Buy knew for 2½ months that Schulze’s deadline would intersect with its original date for its earnings announcement but did not act until this week.

“I think they just kind of screwed up,” Strasser said.

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Richard Schulze