Best Buy agrees to let founder Schulze conduct due diligence

Lock-Up Period

Schulze was willing to agree to a five-month lock-up with no restrictions on his ability to replace the board if it rejected his offer. Best Buy initially wanted an 18-month lock- up and later modified that to 12 months, before reducing that to four months with limits on Schulze’s ability to speak with Best Buy’s management or replacing the board, one of the people said.

The agreement announced today allows Schulze to make a second offer starting in January if the first proposal is rejected. The board would have 30 days to review the second bid before Schulze would have the opportunity to take it directly to shareholders at the company’s annual meeting or at a special meeting, Best Buy said.

If that offer fails, Schulze has agreed not to pursue an acquisition until the agreement expires in a year.

The sides’ law firms, Simpson Thacher & Bartlett LLP for Best Buy and Shearman & Sterling LLP for Schulze, were in talks before negotiations collapsed Aug. 19.

Along with the law firms, Goldman Sachs Group Inc. is negotiating for Best Buy and Credit Suisse Group AG for Schulze, said one of the people.

New CEO

Best Buy on Aug. 20 named Hubert Joly as chief executive officer to oversee a turnaround plan that entails shifting to smaller locations in a bid to fend off Amazon.com Inc. and Wal- Mart Stores Inc. Joly, CEO of Carlson Cos., a Minneapolis-based operator of hotels, restaurants and a travel agency, will take over in September, replacing interim CEO Mike Mikan.

The next day, the company reported second-quarter profit that trailed analysts’ estimates and suspended providing an earnings forecast as sales of computers and televisions dropped.

Schulze has been recruiting executives and seeking the support of private-equity firms since resigning after the board found he failed to relay allegations that then-CEO Brian Dunn was having an inappropriate relationship with a female employee.

Bloomberg News

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