Best Buy founder and former chairman Richard Schulze was given an extension in his bid to buy out the nation’s largest consumer electronics chain. Best Buy announced Friday that it is giving the billionaire the month of February to present his financing plan. Best Buy shares, which had rallied Thursday on rumor of a deal coming together, plummeted on the news, falling 15 percent in midday trading Friday.
This isn’t the first time Schulze has been given an extension. In late August Best Buy gave Schulze 60 days to form an investment group, do his due diligence on the company, and prepare an offer. Unable to meet that timeline, both Schulze and Best Buy later agreed to extend that deadline to mid-December, which has now come and gone.
“Both parties believe that allowing Mr. Schulze to bring his offer after the holiday season and fiscal year end is in the best interests of shareholders and provides Mr. Schulze and his potential partners with an opportunity to include the company’s full-year results as part of their due diligence review,” a Best Buy release states. The release warns however, that “there is no guarantee that Mr. Schulze will present an offer, or that such an offer would be accepted by the Board of Directors.”
Given that Schulze founded the company and was chairman until early June, the notion that he needs more time to do his due diligence just doesn’t wash, says BB&T Analyst Anthony Chukumba in a note to clients today.
“We believe the fact Schulze sought and received yet another extension indicates he has been unable to line up the necessary equity and debt financing to present the company with a fully financed buyout offer,” Chukumba writes. “There is simply no other reason he would need over five months to perform due diligence. We also believe Best Buy’s recent weak performance has likely scared off some potential equity and debt investors that previously may have been interested in participating in a deal.”
Amidst falling sales figures and increasing competition from Amazon and Walmart Best Buy is in the midst of a turnaround led by new CEO Hubert Joly. Joly and his executive team are revamping stores and cranking up customer service in an attempt to revive growth in the retail chain, whose sales have been stuck at around $50 billion annually. If Joly can’t show some improvement coming out of the holiday season, there will be increasing pressure from Best Buy investors to give deals like the one Schulze is trying to put together a much harder look.
