Best Buy shares have been falling as Wall Street remains skeptical that founder Richard Schulze can get the financing to take the company private. (AP)
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The plan to take Best Buy private may still have some assembly required.
Richard Schulze, founder of the flailing electronics chain, held a secret meeting with several large bank lenders last week, looking to persuade them to fund his $9 billion buyout proposal, The Post has learned.
Schulze’s proposal, which could require as much as $7 billion in debt financing to be completed, is “clearly not baked,” one source said.
Likewise, insiders with knowledge of the meeting said Schulze and his adviser Credit Suisse don’t yet have the backing of other private-equity partners to invest in the deal.
“I think it is early, and he is trying to find the horses” to get the deal done, according to another source familiar with the negotiations. “There is definitely a long way to go.”
That’s despite a letter Schulze wrote last month to Best Buy’s board saying that Credit Suisse was “highly confident that it can arrange the necessary debt financing” for a buyout.
Representatives for Schulze did not respond to requests for comment.
Schulze, who is looking to regain control over the chain he founded four decades ago, is hoping to raise the debt financing first, believing that will help him attract partners.
Bank lenders may commit to financing the buyout, contingent on Schulze finding equity partners, the source said, adding that the banks are “mulling it.”
Another source in the meeting said the banks were interested in helping finance the deal, in part because the junk debt markets are hot.
In early August, Schulze submitted a non-binding proposal for Best Buy. At the time, he acknowledged that no PE firms had yet agreed to team with him but said he was “confident, based on my discussions to date, that I could in short order if the board allows me to do so.”
Schulze, who is pledging his 20 percent equity stake in Best Buy toward a deal, reached a deal with Best Buy’s board that would allow him to gain access to its financials. In exchange, Schulze agreed he had only 60 days after he begins due diligence to make an offer.
If he failed to present one, he would have to wait one year before making another run at the chain.
Another source close to the situation said Schulze is now just getting updated confidential financial information from the company, so the 60-day clock has started.
Best Buy’s shares have risen five percent from $17.64 Aug. 3, the last trading day before he made his proposal, to Friday’s close of $18.59.
Nevertheless, that’s still well below the $24 to $26 non-binding offer he made Aug. 6 contingent on due diligence.
“The stock is trading like he hasn’t lined up financing, and we haven’t had any indications otherwise,” one miffed shareholder told The Post.