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Best Buy Board Break Down?
by Brian BolanAugust 20, 2012 | Comments : 8 Recommended this article: (0)
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Richard Schulze declined an offer from the board to conduct due diligence and go to shareholders with his offer to take the electronics retailer private.
Schulze had pervious sent a letter to board in which he outlined that he wanted to be allowed to team up with private equity groups in an attempt to take the retailer private. Schulze owns approximately 20% of the company and was looking at a takeout price of between $24-$26.
Reports coming out of the private meetings held with Schulze state that the board wanted a standstill period of 18 months, which was rejected. Logically, the proposal makes little sense in the face of stiff competition and declining market share. Waiting an additional year and a half would only allow the company to lose more ground to rivals.
The company also announced it has hired Huber Joly as its new CEO. In April Brian Dunn left the company during an investigation into his personal conduct. Joly comes from the French travel firm Carlson Wagonlit Travel.
Does the combination of an uninspiring hire as CEO and the board blocking an acquisition a signal that Best Buy (BBY - Analyst Report) is a sell? Shares are already lower by almost 7% in early trading but are they likely to move lower?
As I see it, the board blocking a potential acquisition at a significantly higher price boarders on a breach of fiduciary responsibility. Installing a new CEO of a travel company may be just what the retailer needs, but the transition from travel to retail electronics may prove to be too difficult.
This situation reminds me of another failed takeover bid. When Microsoft tried to buy Yahoo! a few years back, the board did everything it could to hinder the deal. As a result Yahoo! fell to record lows in the months following the blown up deal.
Can the same thing happen with Best Buy? Tell us what you think!
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