Best Buy founder Richard Schulze offered to buy out the company for $10 billion on Monday, a 30 per cent premium to Friday’s close.Schulze was pushed out of the company in June, but wants to revive the company he founded 46 years ago, and prevent it from collapsing like former rival Circuit City.
It’s not an easy task.
He has a 20 per cent stake in Best Buy, but Minnesota laws make it difficult for hostile takeovers, reports Steven Davidoff for DealBook. He gives a few reasons why:
*A team of directors has to sign off before anyone acquires more than a 10 per cent stake in a company. That doesn’t affect Schulze, since he already owns a 20 per cent stake. But what does affect him is the fact that, anyone with significant shares has to wait four years before pursuing a “combination” deal.
*In Schulze’s case, he’s going to need private equity partners. He’s offering $1 billion of his own stake, but needs more like $3 billion to pull it off. Under MN law, bringing in new, private equity investors puts him back to square one — since he is teaming up with “new” investors.
*Also, under Minnesota law Schulze can’t form a deal with private equity partners until the board approves. He can only have preliminary talks.
*Basically, this deal hinges upon the board waiving the deal in one way or another, and bypassing Minnesota law.
*And beyond all that — if someone else comes into the picture, that will complicate things. Minnesota boards are not required to sell to the highest bidder.
Schulze is currently working with Credit Suisse on the offer.
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