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Schulze and four equity firms examine Best Buy for takeover

updated 01:50 am EDT, Wed October 3, 2012

First steps of due diligence underway, deal valued at $11 billion

Best Buy founder and ex-CEO Richard Shulze and at least four private equity firms have started reviewing the financial data of the beleaguered chain in the first steps toward would could wind up being a $11 billion buyout, according to people familiar with the matter. Schulze is negotiating with the equity firms to determine how much of his 20 percent stake in the company he would have to shell out in a bit and what role he would fill after the takeover.

Schulze has claimed he could buy the troubled retailer for between $24 and $26 a share, valuing the company to nearly $11 billion including the company's debt. Best Buy shares closed at just under $17 yesterday, nearing the lowest point the stock has fallen in four years.

The process is still in the early stages and no decisions have been made yet, according to reports. One of the sources said the group consisting of Apollo Global Management LLC, Cerberus Capital Management LP, TPG Capital LP, and Leonard Green & Partners LP is not likely to come to any agreement on any potential buyout proposal before mid-November.

Electronics retailer Best Buy has suspended profit forecasts and share buyback programs for the remainder of calendar year 2012 to give Joly time to build a turnaround plan for the company. The move comes just days after the naming of a new CEO and weak quarterly earnings caused by continued financial challenges in markets Best Buy serves.

Best Buy has commenced a plan to save $800 million by its fiscal 2015 that would see it close 50 of its "big-box" stores during its fiscal 2013, which started at the beginning of March. The retail chain expected these and other cost savings to cut $250 million in 2013 and $300 million in costs just in retail by the 2015 target.

Other focus shifts in an attempt to save money include fewer large-screen televisions stocked, a reduction in the DVD and CD aisles, and an increase on tablets, e-readers, and mobile phones, emphasizing Best Buy's existing strengths in marketshare over its competitors. The alterations in strategies are an attempt to to lure in customers, reversing a downward trend of store visits. Shoppers today visit Best Buy twice a year on average, rather than 10 times a year as they did a decade ago. [via Reuters]



By Electronista Staff
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