Best Buy founder aiming to take retailer private

7:30 PM aiming, founder, private, retailer No Comments

© Shannon Stapleton / Reuters / Reuters/Shannon Stapleton

The entrance to the Best Buy store is seen in New York.

Richard Schulze, founder of Best Buy, is reportedly considering a bid to take the troubled electronics retailer private.

Schulze has started working with bankers from Credit Suisse to consider his move, according to a report in the New York Times, and he will probably team up with a private equity firm or another well-off investor, the report said.

The 71-year-old Schulze resigned from the company’s board this month after an internal investigation found he failed to inform the board about allegations that the then-CEO Brian Dunn, who resigned in April, was having an inappropriate relationship with a female employee. Schulze is Best Buy’s largest shareholder with a 20.1 percent stake.

BB&T Capital Markets analyst Anthony Chukumba is skeptical that Schulze can pull off a deal to take Best Buy private.

“I think the probability of this happening is very, very slim,” he told CNBC, noting that the financial backing for such a deal would be difficult to achieve, given the current state of the markets.

At its shareholders’ meeting last week, Best Buy made it harder for Schulze to orchestrate a deal to take the company private. It raised the ownership threshold for calling a special meeting related to a change of control to 25 percent from 10 percent.

Best Buy has struggled in recent quarters, its sales slipping as consumers opt to buy electronics from cheaper online retailers such as Amazon.com.

Brian Nagel, a senior analyst at Oppenheimer, said Best Buy remains the largest consumer electronics retailer in the U.S. and is solidly profitable; it’s still a dominant force in the industry, he told CNBC.

“But [Best Buy] faces much more challenging competitive landscape and a very weak product cycle, and I don’t think any of those problems are going to correct themselves any time soon,” he said.

Chukumba said he is waiting to see who the company will appoint as its new CEO, and what his or her turnaround plan will be, adding that he doesn’t think the company will go out of business, as some have predicted.

Click here to check Best Buy’s share price.

There's word the giant electronic retailer is exploring the idea of going private. Brian Nagel, Oppenheimer & Co. senior equity research analyst weighs in on the strategy.