Buyout drama extended at Best Buy
February 2013 promises to be an interesting month at Best Buy following the retailer’s decision to extend the timeframe for company founder and former chairman Richard Schulze to submit a potential buyout offer.
Schulze will have the entire month of February to present an offer and then the board will review the offer within 30 days to determine if it is in the best interests of shareholders.
"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," according to a Best Buy statement.
It is unclear why the parties didn’t think of that back in August when they agreed to a timeframe in which Schulze would have access to non-public information that would allow for the formation of an investment group and a possible offer. Terms of the initial agreement gave Schulze 60 days after the beginning of a due diligence period to present an offer and also indicated that if Schulze submitted a proposal that was rejected by the board he would have an opportunity to submit a second proposal in January 2013.
The company also pointed out that the existence of an agreement with Schulze doesn’t guarantee that he will submit an offer or that such an offer would be accepted.
The extension granted to Schulze is the latest development in an ongoing saga that began to unfold in recent years as the company lost sales momentum and profits deteriorated. The situation escalated in April of this year when former CEO Brian Dunn was fired after only a few years on the job when an investigation concluded he violated company policy by engaging in an extremely close personal relationship with a female employee that negatively impacted the work environment and demonstrated extremely poor judgment and a lack of professionalism.
The company noted at the time that there were no disagreements with Dunn on matters relating to operations, financial controls, policies or procedures. Dunn had been named CEO in 2009 to replace long-time Best Buy executive Brad Anderson. Dunn had spent the prior three years as president and COO and was a Best Buy lifer who joined the company in 1985 as a store associate when the company had just 12 locations and had risen steadily through the operational side of the business.
Dunn’s transgressions also cost Schulze the role of chairman at the company he founded in 1966. The investigation concluded that Schulze acted inappropriately because he failed to bring the matter to the attention of the board’s audit committee in December 2011 when he first became aware of the allegations. The audit committee didn’t learn of the matter until mid-March of 2012. Schulze was given the honorary title of chairman emeritus and the opportunity to serve on the board until June 2013 while fellow board member and audit committee member Hatim Tyabji was elevated to the role of chairman.
In the meantime, board member Mike Mikan was tapped as a temporary replacement for Dunn until new CEO Hubert Joly was hired three months ago. After just two months on the job, Joly unveiled a "renew blue," strategy at an investor conference in New York.