Best Buy reportedly mulling between stock buyout, going private

Best Buy reportedly mulling between stock buyout, going private

Summary: The question facing Best Buy is whether or not it would be better to fix the company by staying public or reverting to a private company.

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While the media spotlight is often on whether or not tech companies are ready to move forward and declare an IPO, the case for Best Buy is just the opposite.

The Wall Street Journal is reporting that Best Buy founder Richard Schulze is mulling over the possibility of taking the big box retailer private. The other option is for him to sell his $1.4 billion stake in the company and run.

Earlier this month, Schulze announced his resignation from Best Buy's board of directors amid the news that he was also exploring options to sell his 20 percent stake in the company.

The big issue for Best Buy, Schulze, and the Wall Street financiers who are supposedly exploring these options is to determine if it would be easier to retool the business for multi-channel commerce as a private company or public one.

If Best Buy goes private, it could have a better chance of fixing its financials and reworking strategies before going back to the public arena. The WSJ explains the pros and cons:

Best Buy is the world's largest electronics retailer by revenue. The company's cash flow of about $2 billion a year could be attractive to private-equity firms, which tend to target businesses with dependable revenues that they can use to make payments on the debt used to finance buyouts.

But it's unclear if private-equity firms are interested in the company, which has seen sales and profits slide recently.

So, one has to ask is that route even worth it as consumers move farther away from the big box retailers for all kinds of electronics.

Perhaps the better move would be to focus on Best Buy's online retail strength to at least try to pose a challenge to the likes of Amazon.com. Best Buy wouldn't be the first (and certainly won't be the last) to shutter and consolidate its stores in pursuit of this strategy.

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  • It depends on why customers are moving away

    if it's because the investors don't want to invest time and effort into making it a place comsumers [i]want[/i] to come, instead taking the cheaper, short term investment option where you just cut services, staff, products, boost the bottom line long enough to sell, then yeah, people won't come.

    So maybe going private would allow them to fix it.

    If it's because people are happy with it, but decide to buy online because it saves them 5.00, yeah maybe time to sell and run.
    William Farrel
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