Last week, Richard Schulze was targeting Best Buy. This week, he’s targeting Best Buy’s board.
Schulze, whose bid for as much as $9.5 billion was spurned by the nation’s largest electronics chain, has responded to the diss by hiring a firm to drum up investor support to shake up the company’s board, The Post has learned.
Best Buy founder Schulze this week was still in talks with the retailer’s directors about reaching a so-called standstill agreement so he and investment partners can study the company’s books ahead of a possible buyout, sources said — despite being blindsided over the weekend by the board’s hire of French hotel exec Hubert Joly as the company’s new CEO.
But Schulze is fast losing faith in those negotiations, sources said, and meanwhile has hired D.F. King & Co. — a proxy solicitation firm that specializes in board battles — as he prepares a campaign to oust directors who are resisting his takeover attempt.
“There are different ways you can engage in what I would call hostile activity without having to buy the company,” a source close to the situation said.
“You can change board members without going hostile,” which is not allowed under Minnesota corporate law.
Best Buy directors who are at least halfway through their two-year terms can be ousted by a majority shareholder vote, according to the company’s most recent proxy filing — a policy designed to balance “institutional memory with accountability to shareholders.”
Such a vote on individual directors need not wait for the retailer’s 2013 annual meeting, and directors can be removed “without cause,” one source noted.
Spokesmen for Best Buy and Schulze didn’t respond to requests for comment.
Schulze, who owns almost 20 percent of Best Buy shares, earlier this month said he would buy the struggling business with private-equity firms for $24 to $26 a share. His ownership stake gives him a big advantage in trying to muster support for ousting board members, sources said.
Schulze has been in talks with buyout shops including KKR, TPG, Apollo and Leonard Green about teaming up for a takeover, said sources. He says his adviser, Credit Suisse, is “highly confident” it can line up as much as $7 billion in debt financing for the deal.
“When a potential acquirer uses advisers, including proxy solicitors, it means they are serious about pursuing their campaign,” said Bruce Goldfarb, founder of Okapi Partners, a New York-based proxy solicitation firm.
Solicitors are hired to help craft and implement a campaign, reach out to investors and win crucial votes.
Schulze hiring D.F. King suggests he and his partners “want to understand their investor base and how investors will respond to different strategies during the campaign,” Goldfarb said.
When Schulze was chairman in 2008, Best Buy hired D.F. King as its proxy solicitor when it bought music site Napster, and the firm could still be familiar with some shareholder views.
Best Buy yesterday said its profit fell 91 percent and was ending its earnings guidance, sending shares down 1.4 percent to $17.91.