Can Best Buy Hold On to Its Value?
With shares of Best Buy (NYSE:BBY) trading much closer to $15 than $25 in recent weeks, an eventual bid for the company by its founder Richard Schulze could be less than his original offer of $8 billion.
Reuters reported on Friday that Schulze has channeled his efforts towards securing financing for the purchase. According the publication’s sources, three private equity firms, Apollo Global Management, TPG Capital LP, and Leonard Green & Partners LP, could join the bidding group.
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In August, Schulze said he would buy the company for $24 to $26 per share, which would value the company between $8.16 billion and $8.84 billion.
However, Best Buy’s shares have fallen 24 percent since his estimate; shares closed Thursday at $15.26. The declining stock price could increase the probability that Schulze’s bid will fall below $24 per share, according to Reuters’s sources.
Best Buy has struggled in recent years; consumers increasingly use its big box stores as showrooms for online retailers like Amazon (NASDAQ:AMZN), and the company has suspended its profit forecast for the remainder of the year after warning that earnings and same-store sales would fall in the third quarter. Following the dismissal of Best Buy’s former Chief Executive Officer Brian Dunn, the company’s board hired Hubert Joly to implement a new restructuring plan to turnaround the company, which will be presented at a meeting with investors in New York on November 13.
Schulze is expected to take until mid-December to submit the final proposal to Best Buy’s board, the sources said.