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The founder of Best Buy thinks he has the best idea to get the retailer back on track - take it private. Richard Schulze, ...
(who started Best Buy with a partner as Sound of Music in 1966), made his
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The founder of Best Buy thinks he has the best idea to get the retailer back on track - take it private. Richard Schulze, (who started Best Buy with a partner as Sound of Music in 1966), made his offer public - valuing the consumer electronics chain at between $8 billion to almost $9 billion. But Anthony Chukumba of BB&T Capital Markets does not think this would be the best way to go. SOUNDBITE: ANTHONY CHUKUMBA, SENIOR EQUITY ANALYST, BB&T CAPITAL MARKETS (ENGLISH) SAYING: "I really feel like we need a breath of fresh air with Best Buy. We need new leadership. We need a new perspective on this company, and so, and also think that it is important that he or she is able to do that without being financially constrained by a ton of leverage on the balance sheet." In order to get the rest of the 20 percent he doesn't own, the founder would finance the takeover with $1 billion of his own equity and debt, with the other $7 or so billion coming from the pockets of private equity firms not named. Taking the company private means the management team can do the hard work without the public glare and the routine of quarterly earnings and conference calls. But that doesn't make the task less daunting, especially without the access to capital markets. Best Buy has to drastically reduce its number of stores, improve in-store customer service, but most of all find a way to fight-off online competition from Amazon. SOUNDBITE: ANTHONY CHUKUMBA, SENIOR RESEARCH ANALYST, BB&T CAPITAL MARKETS (ENGLISH) SAYING: "The competitive landscape is much more difficult now. Amazon has become a much more significant competitor and a very formidable at that. In addition to that, the product cycle is quite weak right now and the only innovative products are being manufactured by Apple, which first off generates lower profit margins at Best Buy and second off Best Buy has to compete with them." Bringing back the management team behind's Best Buy's glory days is also part of the plan, but the market doesn't seem to be buying that. Shares are up on the day but remain below Schulze's offering price - with investors not convinced going private is the kind of turnaround they were looking for. Conway Gittens, Reuters