140918 best buy black friday Richard Schulze offers to privatize Best Buy

Best Buy, once a leader in brick and mortar electronic retailing, is under immense pressure from online outlets such as Amazon.  The struggling company reported a net loss of USD $1.23 billion in March of last year.  Best Buy’s saving grace may come in the form of privatization as Richard Schulze—the chain’s founder—is offering a buyout of the big blue electronic box with the help of his financial adviser Credit Suisse Group AG.

Best Buy, once a leader in brick and mortar electronic retailing, is under immense pressure from online outlets such as Amazon.  The struggling company reported a net loss of USD $1.23 billion in March of last year.  Best Buy’s saving grace may come in the form of privatization as Richard Schulze—the chain’s founder—is offering a buyout of the big blue electronic box with the help of his financial adviser Credit Suisse Group AG.

In a public letter to the board, Schulze offered $24 to $26 per share, which lifts the company’s value to $8.8 billion.  If the buyout goes through it will beat out Capital IQ’s $8.4 billion buyout of Toys R Us in 2005.

Schulze, now 71 years of age, believes he can help Best Buy return to prominence, but only if the board is willing to hand over the helm.

“Bold and extensive changes are need for Best Buy to return to market leadership.  The company’s best chance for renewed success will be to implement these changes under a different ownership structure,” he wrote.

The aging businessman did not specify how he plans to steer Best Buy in the right direction, and it goes without saying that there are skeptics on Wall Street.

Analyst Brian Walker of Forrester says that it doesn’t matter whether or not Best Buy stays public or go private.

“Ultimately, being private or public will not make a difference in itself.  It will not change the ways Best Buy and many other retailers need to innovate to respond to changes in the market," said the Forrester analyst.

What will change if Best Buy does go private is that the pressure of releasing positive quarterly reports will become less of a factor in the company's business strategy.  Therefore, managements will have more time to concentrate on building the company’s online presence, rather than trying to please investors with nice numbers.

Consumers have reported that they go to Best Buy to specifically check out the products (using the store as a showroom), but then opting to purchase from online outlets at lower prices.