Best Buy Co. founder Richard Schulze will return to the company as chairman emeritus after failing in a six-month attempt to take over the electronics retailer he started more than four decades ago.
Schulze also nominated former Best Buy chief executive officer Brad Anderson and former vice chairman Al Lenzmeier to the retailer’s board, the Richfield, Minnesota-based company said today in a statement. Anderson and Lenzmeier, both allies of Schulze, join the board immediately and will stand for election at the annual meeting in June.
The board position returns Schulze, 72, to the company after he resigned in June amid a probe that found he failed to report allegations of inappropriate conduct by the CEO at the time. While Schulze first proposed acquiring Best Buy in August and studied the books for months, he was unable to line up debt and equity financing by a Feb. 28 offer deadline, people familiar with the matter have said.
“The board is ready to focus on turning Best Buy around without the distractions of the Schulze takeover sideshow,” Erik Gordon, a law and business professor at the University of Michigan in Ann Arbor, said today in an e-mail.
Best Buy rose 1.8 percent to $23.20 at the close in New York. The shares have gained 96 percent this year, the best performance in the Standard & Poor’s 500 Index.
Schulze will receive as much as $2.1 million in compensation for consulting and help in preparing a business plan in the next 12 months, CEO Hubert Joly said in a letter filed today with the U.S. Securities and Exchange Commission. Schulze will receive $150,000 in annual salary, with no bonus, as chairman emeritus.
Among his duties, Schulze will make speeches for Best Buy and participate in training, including at Best Buy’s Leadership Institute, and mentor as many as two “high-potential” officers, Joly said. Schulze will meet regularly with Joly and receive monthly and quarterly updates of financial results.
Schulze will get an office for life at Best Buy’s headquarters and will notify Joly in advance of visits there, according to the letter.
Schulze’s appointment suggests he “is unlikely to sell his 20 percent stake in the company at any point in the near future,” Alan Rifkin, an analyst at Barclays Capital Inc. in New York, wrote today in a note. His return “is likely to be a huge morale boost” at the corporate offices and in stores, where he was popular among employees, said Rifkin, who rates Best Buy shares overweight, the equivalent of a buy.
In the August agreement that gave Schulze access to its financial data, Best Buy committed to expand its board and offer Schulze two seats if he refrained from going directly to shareholders with a proposal and didn’t violate standstill provisions between the two parties.
Schulze’s August proposal entailed buying Best Buy for $24 to $26 a share. He and private-equity investors later scaled back those ambitions, seeking three board seats in return for a minority stake.
Best Buy turned down offers from private-equity suitors because the investments would have diluted existing investors, CEO Hubert Joly told analysts on March 1. Schulze was working with Cerberus Capital Management LP, TPG Capital and Leonard Green & Partners, people familiar with the talks have said.
Schulze, still Best Buy’s largest shareholder with a more than 20 percent stake, said after the deadline lapsed he hadn’t decided whether to exercise his right to appoint two nominees to the board.
Schulze said in a filing that he “believes the company deserves a chance to implement its own plan.”
Joly, who took charge in September, has closed stores, cut jobs and matched online rivals’ prices to stabilize sales and curb costs amid rising competition from Amazon.com Inc. and Wal-Mart Stores Inc. Best Buy posted fiscal fourth-quarter adjusted profit that topped analysts’ estimates.