Best Buy (NYSE:BBY): Quarter Earnings, Acquisitions and More
Will the board of directors of Best Buy (NYSE:BBY), parent company to mindSHIFT and Geek Squad, on completely rebuff founder and former CEO Richard Schulze’s acquisition attempt and effort to take the big box retailer private? Yesterday the board named a new CEO. And today board members addressed the question of Schulze’s offer during Best Buy’s Tuesday earnings call. Here’s what they said.
Best Buy executives told analysts that the board had issued a proposal in response to Schulze’s expressed interest in acquiring the company, and that the proposal still stands, but that so far Schulze has refused it. Here’s what the board concluded about the offer, based on a statement issued over the weekend:
“The Board believes it has insufficient information to make a reasonable conclusion with regard to Mr. Schulze’s indication of interest, given the conditional nature of the proposal and Mr. Schulze’s failure to date to disclose financing and equity partners.”
What the Board Wants from Schulze
Basically, in his August 6 offer to acquire Best Buy for $24 to $26 per share, Schulze requested access to due diligence information about the company – non-public financial, operational and legal information. In response, the board asked Schulze for certain information and protections in return. The following is a list of what the board requested, according to the board.
- A waiver of Minnesota law, in order to provide Mr. Schulze the ability to work with his private equity partners to develop a definitive proposal for the outstanding shares of the company
- Due diligence access for Mr. Schulze to the Company’s non-public information
- Due diligence access for Mr. Schulze’s private equity partners
- Due diligence access for Mr. Schulze’s advisers and debt-financing sources
The board said that the primary purpose of its proposal to Schulze was maximize value for all Best Buy shareholders by creating an incentive for Mr. Schulze to offer his best proposal and to “minimize Mr. Schulze’s ability to disrupt the company going forward.”
Second Fiscal Quarter Earnings Results
The future of the struggling retailer is certainly at stake. BBY’s revenues fell year over year for the quarter by 3 percent to $10.5 billion from $10.9 billion during the same quarter last year. Same store sales also continued their decline, albeit at a slower rate. Best Buy reported diluted earnings per share of 4 cents during the quarter compared to 39 cents per diluted share for the same quarter a year ago, missing analyst estimates. Earnings for the quarter include a $91 million restructuring charge, mostly related to store closings. It’s a bleak picture of a company that needs a turnaround. Best Buy shares had fallen about 4 percent in the first half hour of trading on Tuesday to about $17.50 (well under Schulze’s $24 to $26 per share offer)
Best Buy’s earnings release indicates that services (mindSHIFT and Geek Squad should fit into this category) contributed just 7 percent to revenue domestically and 8 percent internationally. But service investments may be considered an investment in the future. That could be why mindSHIFT recently purchased growing Texas MSP White Glove Technologies.