Chuck Stoody, Associated Press
Brian Peterson, Star Tribune
Best Buy founder, CEO plan rare talk
- Article by: THOMAS LEE
- Star Tribune
- November 21, 2012 - 8:07 AM
Best Buy CEO Hubert Joly will meet with the company's founder, Richard Schulze, this week in the Twin Cities as Schulze moves closer to making an offer to buy the consumer electronics retailer.
Joly and Schulze are expected to discuss ways to recharge the struggling company, according to multiple sources. While the pair have previously crossed paths, this week's meeting will provide the first real chance for the executives to share their points of view about the company in a substantial way, a source close to the situation said.
Top members of Schulze's buyout team -- former CEO Brad Anderson and former president Al Lenzmeier -- also are expected to attend, a source told the newspaper.
Analysts and investors say the meeting could mark a turning point in Schulze's ongoing effort to take over Best Buy, which has roots in Minnesota going back to 1966. The gathering comes just one week after Joly held his first major presentation to investors in New York and just before Black Friday, the official start to the critical holiday shopping season.
"It's an extremely significant meeting given the timing," said Burt Flickinger, managing director of Strategic Resources consulting firm in New York.
A company spokesman acknowledged that the meeting will occur, adding that the timing is not that unusual.
"Dick is our biggest shareholder, and Hubert is the CEO," said Matt Furman, Best Buy's senior vice president of public affairs. "It's not at all surprising that they would meet from time to time, just as they have in the past and just as they will certainly do in the future."
Furman declined further comment.
Best Buy has been beset with stagnating sales and a falling stock price. Analysts expect the company to struggle to increase holiday revenues as retailers such as Target and Wal-Mart will match prices with major competitors, including Internet sellers such as Amazon.
Given the challenging climate and threat of online competition, it makes sense for Joly, who has limited retail experience, to tap the expertise of Schulze and Anderson for this critical period, said Colin McGranahan, an analyst with Sanford Bernstein & Co.
Schulze, who will fly to Minnesota from his Florida home for the meeting, is expected to offer as much as $8 billion to buy the company by the middle of December. A source close to Schulze said he delayed his bid to see how holiday sales affect Best Buy's stock price, now just less than $14 a share, down from $20 in August.
Schulze, who initially said his offer would be somewhere between $24 and $26 a share, doesn't want to overpay since he would need to borrow billions to finance the deal, the source close to Schulze said.
Schulze resigned from Best Buy as board chairman in June after a company investigation concluded he failed to inform the board about allegations that former CEO Brian Dunn was having an affair with an employee.
After Schulze announced his intention to buy back Best Buy, he and the board clashed over whether Schulze could raise the money to finance the bid. The two sides eventually struck a deal that would allow Schulze to examine the company's finances and make a second bid in January should the board reject his initial offer.
The meeting with Joly "hopefully shows the board has some sense of urgency to get a deal done at least in principle because there is only a finite time to save [the company]," Flickinger said. The meeting also gives Schulze a chance to size up Joly, who Schulze could consider retaining if he succeeds in acquiring the company.
When Best Buy appointed Joly in late August, Schulze initially was skeptical of the former CEO of Carlson, a source close to Schulze said. Schulze tends to gravitate toward people who have worked with him, sources say, which is why he has recruited so many former Best Buy executives to his buyout team, including Anderson and Lenzmeier.
Since taking over as Best Buy's CEO in September, Joly has worked hard to win over Schulze. Joly has publicly praised Schulze, noting that Schulze, who owns 20 percent of the company, will stick around no matter how the buyout effort plays out.
Behind the scenes, Joly has arranged for Schulze's buyout team to interview key members of the company. With the blessing of the Best Buy board of directors, Joly also has kept Schulze in the loop on important changes to the senior leadership team, including appointing former Best Buy Mobile head Shawn Score as U.S. retail chief as well as hiring Sharon McCollam, a former top executive at Williams-Sonoma, as chief administrative officer and chief financial officer.
During last week's investors meeting in New York, Joly argued the company does not need to blow up its business model, but rather squeeze better performance out of its stores and website, an outlook likely to jibe with Schulze's philosophy of fixing Best Buy.
Schulze, for his part, is likely to oppose any move to significantly reduce the company's 1,100 store base in the United States.
At the New York meeting, Joly told investors he doesn't have any immediate plans to shut down large numbers of stores.
"There will be some store closings on an ongoing basis but we will do it in a thoughtful fashion," Joly said. "We don't need to make those decisions now."
Sounds like something Schulze would say.
Thomas Lee • 612-673-4113
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