Battle for Big Box Retailing

 The recent haggling by the founder and former Chairman, Dick Schulze of Best Buy electronics to buy (and privatize) the company he founded 46 years ago is not only questioning the validity of Best Buy but of big box retailing as we know it.  Schulze who had to abruptly resign as Chairman early this year after taking a blind eye to the antics of his hand picked CEO. Who also had to resign over a “close relationship” with a company employee.

Schulze is currently conducting due diligence and has offered over $22 per share to buy the company. Having survived bankruptcy twice and confronted larger competitors, Schulze is again fighting an uphill battle to secure investment for the buy-out of Best Buy in an environment where electronics have essentially become commodities where the lowest cost reseller is able to survive. I would be surprised if Schulze is successful in securing the almost $10 billion in loans and funding he would require to complete the buy-out given the competitive challenge posed by its on-line nemesis

We have a neutral rating on Best Buy and have suspended coverage until the buy-out discussions come to conclusion. This company is now in play by the merger arbitragers betting either for or against the buy-out being successfully completed.

Read recent article by Bloomberg on Battle for Best Buy