SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

   Non-TechBBY -Best Buy


Previous 10 
From: Glenn Petersen8/6/2012 1:08:08 PM
   of 980
 
How a Best Buy Takeover Might Work

By MICHAEL J. DE LA MERCED
DealBook
New York Times
August 6, 2012, 12:28 pm


Best Buy‘s founder, Richard Schulze, finally confirmed on Monday that he is pursuing a takeover of the electronics retailer, one that might be worth as much as $8.8 billion.

That’s a tall order for any leveraged buyout these days, let alone one for a troubled retailer besieged by Wal-Mart Stores on one hand and Amazon.com on another.

But Mr. Schulze and his advisers at Credit Suisse and the law firm Shearman & Sterling appear willing to give it a shot. Here’s how it might work.

In his letter to Best Buy’s directors, he said that he has had discussions with several “premier private equity firms” with experience in retail deal-making about joining him in his bid.

In total, Mr. Schulze will likely need to raise $2 billion in additional equity financing, to go along with the $1 billion worth of Best Buy shares that he is willing to contribute to a deal. He currently owns about 20 percent of the company.

That means that Mr. Schulze and any group he forms must raise about $7 billion in debt to cover the rest of a leveraged buyout. Given that Best Buy is currently rated Baa2 by Moody’s Investors Service, two levels above junk status, such financing may be relatively expensive to maintain. And as of May 5, the company already had about $1.7 billion worth of debt on its books. It also had close to $1.4 billion in cash and equivalents during that time.

Mr. Schulze wrote that Credit Suisse is “highly confident” that it can arrange the debt.

In some ways, the situation is a little reminiscent of Coty’s failed attempt to buy Avon Products Inc.: A much smaller entity tried unsuccessfully to entice its target into merger talks, and then goes public with its offer. Then and now, the unsolicited suitor proposes a deal backed only by a highly confident letter, rather than fully committed financing.

It’s unclear how many partners Mr. Schulze would eventually work with. So-called “club deals,” in which several buyout shops team up, have proved unpopular since the end of the private equity boom in 2007. Limited partners, most of whom are invested in multiple funds, have increasingly balked at the practice, arguing that it increases their exposure to investments and reduces any claims to uniqueness on the firms’ parts.

Mr. Schulze may ultimately end up working with one firm, though that shop would then likely bring on a number of its limited partners as co-investors in the deal, according to a person briefed on the matter.

Monday’s disclosure followed weeks of efforts by Mr. Schulze to engage with the Best Buy board and begin performing due diligence, this person said. Minnesota law dictates that any shareholder who acquires a big stake in a company must wait four years before seeking any sort of business transaction. Since any members of a Schulze-led consortium would be new investors, they would be subject to the law — unless Best Buy gives them permission to begin talks.

That’s why Mr. Schulze has been fairly careful about not formally aligning himself with a buyout firm and saying only that he has been “discussing” bringing back two former Best Buy executives if his deal should succeed.

Over the weekend, however, Best Buy’s directors said that they needed about three more weeks to respond to his request, this person said.

The company said in a statement that it will “review and consider the letter in due course.” It has retained Goldman Sachs, JPMorgan Chase and the law firm Simpson Thacher & Bartlett as advisers.

It’s not quite clear that Best Buy shareholders believe a deal could happen. While shares in the company are up 9 percent as of midmorning on Monday, at $19.24 they remain well below the range that Mr. Schulze is proposing.

dealbook.nytimes.com

Share RecommendKeepReplyMark as Last Read


From: Sr K10/12/2012 1:06:28 AM
   of 980
 
Best Buy to Match Online Prices

Best Buy is planning to match the prices of online rivals such as Amazon this holiday season, even as it plays down its concerns over shoppers using its stores as a showroom. 59 min ago

Share RecommendKeepReplyMark as Last Read


From: Sr K12/19/2012 6:07:54 PM
   of 980
 
BBY executive leaves to be COO of SYMC.

Share RecommendKeepReplyMark as Last Read


From: ChrisGillette7/3/2013 5:44:41 PM
   of 980
 
Looks like a good short candidate. Any thoughts?

IMO, despite the recent hype and run-up in share price, Best Buy continues to face all of the same secular problems that it's faced over the last decade. In short, if Amazon doesn't kill it, then Costco, Walmart, and Target will...

Share RecommendKeepReplyMark as Last ReadRead Replies (1)


To: ChrisGillette who wrote (974)8/1/2013 11:09:06 AM
From: ChrisGillette
   of 980
 
<<Looks like a good short candidate. Any thoughts? IMO, despite the recent hype and run-up in share price, Best Buy continues to face all of the same secular problems that it's faced over the last decade. In short, if Amazon doesn't kill it, then Costco, Walmart, and Target will...>>

Initiated a short position today. Looking for sub-$25.

Share RecommendKeepReplyMark as Last ReadRead Replies (1)


To: ChrisGillette who wrote (975)9/3/2013 4:13:48 PM
From: ChrisGillette
   of 980
 
<<Initiated a short position today. Looking for sub-$25.>>

Added to the position today. Still looking for sub-$25.

Share RecommendKeepReplyMark as Last ReadRead Replies (1)


To: ChrisGillette who wrote (976)11/18/2013 7:33:00 AM
From: Labrador
   of 980
 
You sticking with that BBY short?

Share RecommendKeepReplyMark as Last ReadRead Replies (1)


To: Labrador who wrote (977)11/18/2013 9:30:09 PM
From: ChrisGillette
   of 980
 
<<You sticking with that BBY short?>>

Yes, and will look to increase the position after earnings tomorrow if the stock gets to around $50/share.

Share RecommendKeepReplyMark as Last ReadRead Replies (1)


To: ChrisGillette who wrote (978)11/19/2013 8:56:27 AM
From: Labrador
   of 980
 
I don't think that you'll see $50 - BBY is probably heading back to the mid-$30's is my guess. Margin compression is a certainty - it is cut-throat in the markets - just to compete with Amazon as its sales just keep growing and growing with no concerns with margins.

How can BBY compete with Company on the web that cares nothing about profitability at least for years to come?

Share RecommendKeepReplyMark as Last ReadRead Replies (1)


To: Labrador who wrote (979)11/19/2013 11:06:05 AM
From: ChrisGillette
   of 980
 
As I commented on another board, we've seen this story before and--regardless of the short-term trading environment--know how it will end.

If it was as simple as price-matching and sub-leasing, then Circuit City, RadioShack, Borders, Barnes and Noble, etc. would have already figured it out.

As you point out, it's difficult to price-match Amazon. Not just because Amazon doesn't care about profits, but also because:
(a) Amazon doesn't have the same fixed-cost structure/baggage
(b) Amazon has much more scale (i.e., operationally more efficient)
(c) Amazon is financially much stronger and more diversified, allowing it to use profits in one area to subsidize losses / price wars in other areas (like it did with diapers.com before acquiring it and like what it's currently doing with Netflix).

But price wars and gross margin aren't Best Buy's only problems.

The fundamental problem is that same store comps continue to decline both domestically and internationally. Last quarter, Best Buy touted that its domestic comp store sales only declined 0.4% YoY while its domestic online sales increased 10.5% YoY. What Best Buy didn't tout (but mentioned as a footnote in its financials) was that its comp store calculation includes online sales and therefore masks the true decline in same store sales.

Further, Best Buy's online strategy will only worsen the same store sales situation. Again, we've seen this story before and my guess is that much of Best Buy's online sales growth will come not at the expense of Amazon but rather at the expense of its own stores (i.e., channel conflict).

Share RecommendKeepReplyMark as Last Read
Previous 10