Best Buy Co., the world’s largest consumer-electronics retailer, fell the most in two years after giving founder Richard Schulze more time to study the company and arrange financing for an offer to take it private.
Best Buy agreed that it was in the best interest of shareholders to let Schulze and his partners include results from the holiday season in their due diligence review, the company said today in a statement. Schulze can now make a proposal to buy the company from Feb. 1 through Feb. 28.
Schulze, 71, has been working with three private-equity firms, including Cerberus Capital Management LP, on a takeover of the electronics chain he founded more than four decades ago, people familiar with the matter have told Bloomberg News. Schulze bid $24 to $26 a share for Best Buy in August and later that month reached an agreement that allowed him to conduct due diligence and present a fully financed offer within 60 days.
“This extension indicates Schulze has been unable to line up the necessary equity and debt to finance a transaction,” Anthony Chukumba, an analyst at BB&T Capital Markets in New York, said today in a note. “There is simply no other reason he would need over five months to perform due diligence.”
The shares dropped 14 percent to $12.11 at 11:02 a.m. in New York and earlier slid as much as 18 percent for the biggest intraday decline since Dec. 14, 2010. Richfield, Minnesota-based Best Buy had fallen 40 percent this year through yesterday.
Best Buy said today it will review and take a position on Schulze’s potential offer within 30 days. Matt Furman, a spokesman for Best Buy, declined to comment on the bid extension beyond the statement. CNBC reported today’s extension earlier.
The company’s share decline today follows a 16 percent increase yesterday, which was the largest gain in almost four years, after the Minneapolis Star-Tribune reported Schulze would submit an offer to the board before the Dec. 16 deadline. The bid would be about $5 billion to $6 billion, the newspaper reported, citing a person it didn’t name.
Today’s extension indicates the board “actually has interest in potentially selling the company” and is “willing to entertain a bid,” Colin McGranahan, an analyst at Sanford C. Bernstein & Co. in New York, said in an interview.
Schulze resigned as chairman in June after an investigation found he failed to tell the board’s audit committee about allegations former Chief Executive Officer Brian Dunn was having an inappropriate relationship with an employee.
Best Buy last month posted a $10 million loss for its fiscal third quarter as sales at established stores fell. Chief Executive Officer Hubert Joly is working to improve customer service as customers defect to Amazon.com Inc. and Wal-Mart Stores Inc.