Best Buy Co. Inc. (NYSE: BBY) is still a buyout candidate. That is what Reuters has said in a report. Founder Richard Schulze and four named private equity firms have reportedly started the process of examining the books in a due diligence period. There is a fair question to ask though: Does the founder really need to do much due diligence on his own to try to buy this company considering that things are not much different from when he "left" earlier this year?

The private equity firms that have been named as potential co-suitors with Schulze are Apollo Global Management (NYSE: APO), Cerberus Capital Management, TPG Capital and Leonard Green & Partners. If these firms are going to compete against Schulze - well, let's just say that this would be another matter. It would seem likely that any private equity firm would want Schulze involved, but stranger things have happened in the world of M&A.

As a reminder, Schulze has close to a 20% stake and is the largest shareholder in this situation. Best Buy shares are indicated up 4% at $17.66 after closing at $16.97. The market cap is about $5.7 billion as of yesterday's close, and the 52-week range is $16.25 to $28.53.

Our take is simple. It is unlikely that even a $20 bid will suffice, as that will result in many holders taking a 50% loss. It is likely that $25 will be needed to garner much shareholder support, and even then the firms likely will be sued for acquiring this for too low a price.

JON C. OGG


Filed under: 24/7 Wall St. Wire, Consumer Electronics, Mergers & Acquisitions, Private Equity, Retail Tagged: APO, BBY

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