Minneapolis – Best Buy confirmed today that founder Dick Schulze failed to submit a qualified buyout bid for the company before a Feb. 28 deadline, and that its directors blocked his 11th hour effort to gain an additional seat on the board.
On an earnings call this morning, CEO Hubert Joly noted that “Yesterday was, of course, a deadline for Dick to make a qualified offer and no such offer was received.”
He added that the company also rejected a proposal that would have given Schulze and his financial backers a minority stake and three seats on the 11-director board, noting that the cost of the investments would have been “excessive and dilutive to our existing shareholders.”
The move effectively ends Schulze’s six-month effort to acquire or regain control of the company he founded 47 years ago.
In a federal filing today, the former chairman indicated that he had received voting power over an additional 1.2 percent of Best Buy shares, for a total of nearly 21 percent, and confirmed his ill-fated boardroom play.
“Over the course of the past several months, Mr. Schulze facilitated various offers that would have resulted in the investment of new equity into the company by up to three leading private equity firms,” the filing states. “In connection with such investments, it was contemplated that each private equity firm would be provided a board seat and that Mr. Schulze would nominate two directors to the company’s board of directors. In addition to their capital, Mr. Schulze believed that the private equity firms would add significant expertise, talent and experience to the company’s board of directors, which would assist the company in returning to its position of market leadership.
“In the end,” the filing stated, “the company determined not to accept the terms offered by the private equity investors for their investment. Mr. Schulze believes, however, that the company deserves a chance to implement its own plan. No one is more interested in the success of the company than Mr. Schulze.”
The filing also noted that Schulze has not determined whether or not he will exercise his right to appoint his own two nominees to the company’s board.
The corporate drama began last June when Schulze resigned from Best Buy’s board for failing to report improprieties by former CEO Brian Dunn, and announced his intention in August to acquire the company for approximately $8 billion, including $1 billion of his own equity.
Best Buy extended his deadline for submitting a buyout bid twice, and Schulze will now have to wait another year before making another acquisition offer under terms of a due diligence agreement hammered out in August.