Best Buy Taps New CEO as Takeover Battle Heats Up
Published: Monday, 20 Aug 2012
By: Reuters
Best Buy [BBY down -7%] named Carlson executive Hubert Joly as chief executive on Monday, hoping to tap his expertise in restructuring companies to turn around the world's largest consumer electronics chain.
The struggling retailer also said its founder Richard Schulze has turned down an offer from the board to conduct due diligence in connection with his proposal to take the company private at a valuation of more than $8 billion.
Best Buy, engaged in a takeover battle with founder Richard Schulze, has posted same-store sales declines in seven of the last eight quarters. It is expected to report results for the latest quarter on Tuesday.
Joly, former CEO of privately held hospitality and travel company Carlson, replaces interim CEO Mike Mikan. Joly is expected to step into his role as president and CEO in early September when his visa is secured, Best Buy said.
Joly led the restructuring and growth of Vivendi’s video game business — now part of Activision Blizzard [ATVI 11.81 -0.29 (-2.4%) ] — from 1999 to 2001.
He also drove the turnaround of EDS — now part of Hewlett Packard [HPQ 19.73 0.21 (+1.08%) ] — in France from 1996 to 1999, Best Buy said.
Mikan was named interim CEO following the abrupt departure of CEO Brian Dunn in April during a personal conduct probe that eventually found he had engaged in an improper relationship with a female employee.
Schulze, the 71-year-old former chairman of Best Buy, informed the board earlier this month he was interested in teaming up with private equity partners to buy the company for $24 to $26 per share, or more than $8 billion.
Schulze Declined Due Diligence Deal
The struggling retailer also said Schulze has turned down an offer from the board to conduct due diligence in connection with his proposal to take the company private.
The consumer electronics chain said its board had authorized its advisors to start talks with Schulze, and had shown "great flexibility" on structuring an agreement that would not limit his ability to make a definitive proposal.
Schulze has noted., however, that obstacles to making an official bid include a provision of Minnesota law that would prevent him from bringing in private-equity firms and his inability to access the company's financial data.
Best Buy said on Sunday it had offered Schulze a proposal that would have given him 60 days to put together a deal for the company, and would have also have given him the opportunity to take a buyout offer directly to shareholders from January.
"Mr. Schulze did not accept the company proposal," it said in a statement.
A source familiar with Schulze said the executive and his team were "shocked" by the Best Buy statement because they thought they were still in talks with the company over an agreement on due diligence.
A spokesman for Schulze could not be immediately reached.
Best Buy said the board's proposal would have given Schulze a waiver of Minnesota law so that he could develop a definitive proposal.
It said it asked Schulze to agree to "certain protections for Best Buy and its shareholders, with the goal of limiting outside distractions", in exchange for opening its books. It did not detail the conditions.
The retailer has previously called Schulze's proposal "highly conditional" and asked him to name his still undisclosed private-equity partners.
Schulze, who owns about a fifth of Best Buy's shares, has said he plans to fund a deal through a combination of investments from private equity firms, reinvestment of about $1 billion of his own equity, and debt financing.
Last week, Schulze sent the company's board a second letter saying he would be persistent in stalking Best Buy.
"I still hope to work with the board on a mutually beneficial transaction — but you should know that I am not going away," Schulze wrote.
Schulze resigned from the company's board in June and said he was exploring options for his ownership stake. He lost the chairmanship after a probe by a board committee found he had failed to tell the board about allegations of personal misconduct by Dunn.
Best Buy has been closing stores, cutting jobs, and trying out a new store format to improve business. It has faced criticism for being too slow to react to a changing retail world, where many use Best Buy as a "showroom" to try out gadgets and then buy them online or elsewhere for less.
Best Buy shares [BBY 18.90 -1.37 (-6.76%) ] closed on Friday at $20.27.
