Print 21 comment(s) - last by jardows.. on Aug 29 at 12:18 PM

  (Source: EfficientGuide)
Schulze has 60 to offer a purchase proposal

Retail electronics giant Best Buy has been going through some rough times as the company faces increasing pressure from online and discount retailers such as Amazon and Walmart. Best Buy founder Richard Schulze announced about a month ago that he was considering an attempt to take Best Buy private with private equity or possibly selling his 20% stake in the company. 
The Best Buy board and Schulze have announced that they have reached an agreement that will permit Schulze to form an investment group and conduct due diligence needed to make a fully financed proposal to acquire Best Buy. The agreement establishes a non-exclusive, orderly process with Schulze and has been filed with the SEC.
The agreement allows Schulze to perform immediate due diligence with access to non-public company information to be shared with advisors and potential private-equity partners. Under the terms of the agreement, Schulze will be allowed to bring forward a fully financed and definitive proposal within 60 days of the beginning of the due diligence period. The due diligence period can also be extended in certain circumstances.
Schulze has also agreed that if his proposal is rejected by the Board of Directors, he will not pursue an acquisition until January 2013. At that time, Schulze will have the opportunity to make a second offer if the original is rejected. The Wall Street Journal reports that Schulze has previously publicly announced that he was proposing a $10 billion buyout of the company he helped found and that his financial partners were "highly confident" that the money to purchase the company could be raised.
Best Buy has also announced that it will offer Schulze two seats on the company's board reflecting the 20% of the company he owns. However, the two seats could be withdrawn if Schulze decides to make a purchase offer directly to shareholders or violates standstill provisions of the agreement.

Sources: Reuters, Wall Street Journal

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By Shadowmaster625 on 8/28/2012 10:04:17 AM , Rating: 2
Best Buy is on one scary trendline. Multiple trendlines actually, and they're all pointing downward. So... clearly a major turn in those trends must be anticipated for this deal to make any sense. What is this guy seeing that the average dumbnut analyst is not seeing? Amazon being taxed to hell making B&M's more competitive?

Only a major move at the federal level can possibly justify this. Maybe this guy knows a few senators. Pull a few string. Slap every amazon with a huge tax. Maybe something on an obamacare level of corruption? Some kind of corrupt boondoggle handout to B&Ms, similar to how obamacare was a $$ trillion handout to insurance companies?

RE: Why?
By Rukkian on 8/28/2012 10:08:16 AM , Rating: 4
Or he wants to company to start looking farther down the road than tomorrow like most publicly traded companies. He may want to see the company actually survive instead of being the next circuit city.

RE: Why?
By Dr of crap on 8/28/2012 10:21:24 AM , Rating: 1
While that's a good idea, but companies now only look a year or two down the line and I swear do not care what happen in 5 years.

It's all about what makes them look good at the present time and not what the future might hold. They always say it's for the share holders. Need to make quick profits. What happened to long term profit building and long future outlook???

RE: Why?
By Reclaimer77 on 8/28/2012 11:22:19 AM , Rating: 3
God I swear, you never know what you're talking about.

Consumer and investor uncertainty is at an all time high under Obama. Companies are literally twisting in the wind, not knowing which way to turn because they have no idea what this Administration will do next. They're holding onto their cash in record amounts because to invest in this economy is WAY too much of a risk. You can't make a 5 year plan right now before the election. Because if Obama wins, any growth plan you had is going to be tossed.

RE: Why?
By tayb on 8/28/2012 2:22:40 PM , Rating: 2
I'm sure you say this as a small business owner who is just swaying in the wind right now. lol.

RE: Why?
By fortiori on 8/28/2012 4:44:33 PM , Rating: 2
ah the old crocodile-tear, reverse-shill, fake-martyr argument. i love it. reminds me of when little babies cry to mommy that their brother stole their cookie. or when dennis rodman does one of his legendary basketball flops.

you don't seriously buy that bullshit crybaby manipulation do you reclaimer? the business interests in america are the foxes guarding the henhouse. they control everything, including *gasp* the obama administration.

wake the fuck up man, i'm so tired of your tunnel-vision on this. cks.sake.

RE: Why?
By Motoman on 8/28/2012 10:53:53 AM , Rating: 2
There's nothing that can be done to stop the trend of consumers going online instead of B&M.

B&M is at massive disadvantages all the way around...prices are better online (and sales tax or not never made any difference...if the price online is 20% cheaper than at the B&M, it's still 20% cheaper after tax), customer service is better online, selection is better online, convenience is infinitely better online, etc.

The one and only thing B&M has on online vendors is instant gratification. They have to capitalize on that somehow. But I can tell you, the painful upsell attempts, woefully incompetent sales and service staff, and the overall negative customer experience has to stop in order to capitalize on that.

RE: Why?
By RufusM on 8/28/2012 1:12:57 PM , Rating: 2
The other advantage of B&M stores is: see it, hold it, try it.

For things are that are basically commodities, Internet retailers are perfect: computers, DVDs, games and other small to medium packaged products.

For other things B&M still makes sense for the foreseeable future, at least to the majority: cars, clothes, TVs and other things that you really want to see, feel or try before buying.

Taxes is a big part of it. Internet stores should be subject to all sales taxes. The current sales tax policy was an equalizer one upon a time for mail order, but the Internet more than levels the playing field today.

RE: Why?
By Ammohunt on 8/28/2012 2:12:25 PM , Rating: 2
I guess you haven't been to Bestbuy in a while; honestly i can't understand why they even have B&M stores. Each store carries different inventory when you ask a doofus in a blue shirt for something they say check the online store not to mention they are not price competitive to the large retailers like Walmart e.g. pay $30 for a blu-ray at bestbuy or $20-24 at Walmart.

RE: Why?
By RufusM on 8/28/2012 4:24:36 PM , Rating: 2
Well, I replied to the post about B&M stores in general; that they still have a specific role.

As for Best Buy, I haven't been in their stores in a while because I buy virtually all of my electronics online (except for TVs). The next time I'm in line to buy a new TV I probably will stop in and see what they have and price compare against other B&M stores. I'm just not comfortable having UPS ship me a 100lb TV. At least the B&M stores get them on pallets with better packing that just one, lone TV in the back of the UPS truck. Maybe that's just being naive on my part though. :)

RE: Why?
By Solandri on 8/28/2012 4:27:45 PM , Rating: 2
The other advantage of B&M stores (the biggest IMHO) is rapport and professional advice from the staff. There are a couple local camera and fishing stores which I frequently buy from because if there's something I need and I have absolutely no idea where to start looking, I know they will set me up right. Their staff is knowledgeable and steers me to the right purchase without any upsell or ripoff.

Sure their price is a bit higher than online, but compared to the hours of researching they save me, I gladly pay it. e.g. For my latest reel purchase I was told, "You don't need the more expensive one. It's got a couple extra bearings and some fancier plating, and that's about it. Unless you fish 100 days a year, you're never going to notice the difference." They saved me $80, so I was more than happy to pay $25 higher than online for the reel I did buy.

Unfortunately for stores like Best Buy, they place little value in this sort of good advice and purchase guidance. In fact they've been exploiting people expecting this from a B&M store, by hiring salesmen who know nothing but are really good at acting as if they know what they're talking about while they pitch their upsell. They develop no customer loyalty, and consequently are first on the chopping block as Internet sales pressure B&M stores.

RE: Why?
By tayb on 8/28/2012 2:21:07 PM , Rating: 2
I was wondering, could you inject more unnecessary politics into your post next time? I don't think I heard enough about corruption, senators, and Obamacare. The article was glaringly absent of off-topic politics, thanks for the assist.

By p05esto on 8/28/2012 10:53:18 AM , Rating: 2
I would rather buy stuff in person if it was about the same price. I like to see TVs before purchasing, look at the laptop, hold the camera, etc. I really wish BB would be competitive on prices (has to include tax). If I have to pay $200 more for a TV at BB then it's just not worth it... maybe for $25 more on a $120 TV is ok, but that's about it.

RE: Store
By Motoman on 8/28/2012 11:23:47 AM , Rating: 2
They can't.

The fundamental problem is that B&B and online have vastly different cost structures.

B&M has to rent massive amounts of retail space. They have to manage logistics and inventory around to all their stores. The have to have several different kinds of staff at each store. So on and so forth.

Online vendors have to do none of that. Their overhead is vastly smaller than B&M. Hence, they can sell a given product at a much lower price and still make the same, if not better, margin.

This is why B&Ms will never be able to match prices with online. Not for other than the occasional door-buster or loss-leader that is. And as implied there, the B&M is actually losing money on those items.

B&Ms only have one possible advantage over online: instant gratification. Everything else is necessarily in the online vendor's favor. B&M has to learn to exploit their one advantage, or die.

RE: Store
By TheDoc9 on 8/28/2012 2:34:09 PM , Rating: 2
While I agree, the problem with this logic is that there's a lot of successful B&M stores that are in no danger of closing their doors. Fry's comes to mind. This is really about mis-management and greed on the part of Best Buy.

RE: Store
By wempa on 8/28/2012 2:52:45 PM , Rating: 2
Even if they cannot match the online price, they should at least try to set prices that makes it worth the "instant gratification". If a TV costs you $1500 in the store and $1250 online, you most likely aren't going to be paying that $250 premium. If, however, it was priced only $50-$75 more in the B&M store, you'd be a lot more likely to eat that cost. Sales would increase dramatically, too. So, it'd be a better situation than the one they are in now.

RE: Store
By Solandri on 8/28/2012 4:42:11 PM , Rating: 2
They don't have to match all online prices. They just have to match or beat some. Then while you're in the store to buy that sale item, you notice the router and LAN cable you also needed for only $3 more than online. And since it's right there in front of you and you've already paid for the gas to get there, you pick those up too.

The problem for Best Buy is that they charge like $20 for a $3 cable. Frys doesn't do that as much. Most of the stuff I see there is priced pretty close to online prices, and their sale prices frequently beat online prices. So they remain in business.

RE: Store
By MrCaffeineX on 8/29/2012 9:56:37 AM , Rating: 2
This strategy is as far as I can tell very successful for MicroCenter. They sell you a CPU/Motherboard at a loss, but make up for it on other items such as Memory, Cases, PSUs, HDDs, etc. If you go into MicroCenter, at least the two I have been in, they actively advertise the Newegg and TigerDirect prices for CPUs as well as Motherboards, but not for the products where MicroCenter's price is higher. I imagine they must get a decent price on CPUs and Motherboards, since they seem to stock a limited variety of each, but in extreme quantities, at the stores I have shopped in. I also enjoy the fact that their salespeople, while not necessarily the brightest, are not trying to push cell phone upgrades or satellite TV service on me when I shop there.

By rickon66 on 8/28/2012 12:54:05 PM , Rating: 2
It's taking on water, how long before the sinking?

By Nehanarac on 8/28/2012 1:01:10 PM , Rating: 2
Soon, I hope. I hate that store. Incompetent salespeople, terrible selection, stupid floor layout.

By jardows on 8/29/2012 12:18:03 PM , Rating: 2
I wish these articles would quit blaming Amazon for Best Buy's woes. People aren't leaving BB in droves because Amazon sells things cheaper, Best Buy has brought it on themselves with their horrible customer service. Even being overpriced would not hurt them as bad if they provided even B+ service (I think they are too far away to hope for A+ service).

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