Come on, Schulze: Put Up or Shut Up

by Marc Bastow | August 20, 2012 12:30 pm

BestBuyLogo e1297955683480 Come on, Schulze: Put Up or Shut UpAt this point, investors need a scorecard and a timeline to keep track of what’s going on at Best Buy (NYSE:BBY[1]).

They also need a calculator — at least to figure out how much money shareholders are losing every time someone opens their mouth at the retailer’s Richfield, Minn., headquarters.

BBY shares were down another 7% Monday morning after the company’s board offered founder and former CEO Richard Schulze apparently balked at an opportunity to look at the books and decide whether to proffer a bid for the company. Best Buy also announced the hiring of Hubert Joly[2] — recently the head of privately held Carlson Hotels Worldwide — to the post of president and CEO.

Why? I’m not sure. Maybe to take everyone’s eyes off Tuesday’s earnings release (or lack thereof). Maybe because he is supposedly a takeover/turnaround guy. Frankly, he’s not the biggest fish we need to tackle right now.

What’s important: According to Reuters[3], Schulze — who earlier this month made a sort of half-play to take his former company private[4] — was offered a chance to do his due diligence in advance of making a formal play for the company. On Aug. 17, BBY’s board of directors authorized its advisers to start talking with Schulze about setting up a formal agreement on a process for Schulze and his advisers at Credit Suisse (NYSE:CS[5]) to get financial, operational and legal information.

Further, the board proposed allowing Schulze and his group to make a formal proposal to shareholders if the board rejected such a bid. So while the door might not have been wide open, it at least was ajar … and it was rejected. So, BBY inked Mr. Joly and put him at the Titanic’s helm.

Wow.

The chances of a deal getting through at this point are slim to none, and slim is fading fast. So, Schulze: It’s time to crap or get off the pot.

You know this company inside and out, upside down and right-side up. It is your company — one you built from the ground up. You’d still be there if not for loyalty or just bad judgement in the Brian Dunn situation[6]. It probably would’ve been nice to get an actual look at the books, just to be sure nothing changed during the past six months — you passed up your chance, but you still should have some idea of what the numbers might be.

Put together a formal offer with a fixed number and the name of the investors and debt players ready to write checks.

Whatever you do, stop making a joke of the idea of taking the company private. Shareholders are waiting, and while they wait, they drown. BBY shares have lost 60% since peaking in 2010, and there’s little to suggest things are going to head in the other direction.

Unless jawboning and posturing to drive down the shares and make your initial “discussion” offer look good is the strategy, make an offer and make it a firm one: If you can’t muster up $30 per share because 1) the company is not worth that much, and 2) you can’t raise enough equity or find enough debt to cover the price, then at least put the $24-$26 number formally in play. Anybody can throw out numbers.

You have a lot to lose if you just hold tight and continue to play it close to the vest. If you do nothing, you have to hope Joly and your former colleagues have an idea about how to save the company — and considering how hard Amazon (NASDAQ:AMZN[7]), Target (NYSE:TGT[8]) and Wal-Mart (NYSE:WMT[9]) are taking it to Best Buy, saving the company seems like a reach, anyway.

At least if you can muster together a formal proposal and put a bid in play, you’d have a shot at being the one behind the wheel. You get the chance to control some of your own destiny — namely, that 20.1% ownership stake. Saving Best Buy yourself won’t be any easier, but you seem to trust yourself a lot more than anyone else.

Worst case? You get rejected and face the same path you already face today.

Either way, enough is enough. The door is all but closed, Schulze. Get your act together, put it on paper and make your play.

Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing, he did not hold a position in any of the aforementioned securities.

Endnotes:
  1. BBY: http://studio-5.financialcontent.com/investplace/quote?Symbol=BBY
  2. announced the hiring of Hubert Joly: http://investorplace.com/2012/08/best-buy-rejects-buyout-taps-new-ceo-shares-tumble/
  3. According to Reuters: http://www.reuters.com/finance/stocks/BBY/key-developments/article/2592835
  4. take his former company private: http://investorplace.com/2012/07/best-buys-last-chance-may-be-coming-soon-bby-amzn-ebay-dell-hpq-wmt-tgt/
  5. CS: http://studio-5.financialcontent.com/investplace/quote?Symbol=CS
  6. Brian Dunn situation: http://investorplace.com/2012/05/best-buy-chairman-resigns-after-ceo-inquiry/
  7. AMZN: http://studio-5.financialcontent.com/investplace/quote?Symbol=AMZN
  8. TGT: http://studio-5.financialcontent.com/investplace/quote?Symbol=TGT
  9. WMT: http://studio-5.financialcontent.com/investplace/quote?Symbol=WMT

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