Lasser calculates that to raise the equity portion of the deal, a consortium of up to five private equity firms contributing up to $600 million apiece might be needed. "In our view, this would be a lot of exposure to an investment that has a high degree of uncertainty surrounding a potential exit," he wrote.
Both Lasser and McShane maintained neutral ratings on Best Buy shares and price targets of $20 and $21, respectively -- far below Schulze's prospective offer.
Still, Best Buy shares are on the rise because Schulze's proposal is likely to be taken favorably by some shareholders who are looking for a way to exit the company, as it loses customers to online retailers like Amazon.
Schulze, who spent 46 years at Best Buy, may also be seen in a favorable light by shareholders were he to piece together a formal share bid. In his letter, Schulze said that former Best Buy executives Brad Anderson and Allen Lenzmeier would "be interested in rejoining the company," potentially restoring a management team that made Best Buy into a leading electronics retailer.
During the period from 1991 through 2009 when Schulze, Anderson and Lenzmeier led Best Buy, the company's revenues increased from approximately $900 million to over $45 billion. Earnings before interest, taxes, depreciation and amortization (EBITDA) increased from approximately $30 million to $2.9 billion, Schulze noted in the letter. Meanwhile, shareholders enjoyed a total return in excess of 16,000%.
"This proposal represents a unique win-win opportunity for everyone involved," said Schulze in the letter. "It would create a new day for Best Buy employees and provide public shareholders with a significant all-cash premium for their shares. Importantly, it would eliminate the market and execution risk for Best Buy shareholders associated with a turnaround under an interim CEO."
While Schulze is talking up the offer as a win-win, the similarities to Icahn buyout tactics suggest anything but a guaranteed victory for the former Best Buy chairman, or shareholders.
For more on potential large buyouts, see details on why reports of
takeover hinge on a
pre-bust M&A market.
-- Written by Antoine Gara in New York