- Associated Press - Monday, August 27, 2012

NEW YORK — Best Buy Co. Inc. and its founder and former chairman, Richard Schulze, say they have an agreement that will allow Mr. Schulze to pursue his plan to try to buy the nation’s largest consumer-electronics chain.

The news sent Best Buy shares up 3.2 percent to close at $17.87 Monday.

Best Buy said the agreement will allow Mr. Schulze to get access to confidential financial statements and allow him to form an investment group with private equity sponsors to make the bid. He already owns 20 percent of the company’s stock.

The agreement is the first step toward Mr. Schulze making an official bid for the company as Best Buy tries to turn around results and adjust to a new CEO. Earlier this month, Mr. Schulze suggested he could pay $24 to $26 per share for the chain. Best Buy said it was considering the overture, but the talks stalled a week ago, with the two going back and forth in public exchanges.

The retailer says the agreement establishes a nonexclusive orderly process for a bid while protecting the interests of all shareholders. Mr. Schulze says the agreement will allow him to examine the company’s books in detail.

Under the agreement disclosed Monday, Mr. Schulze and his potential partners will have 60 days to present a fully financed proposal.

Analysts say the agreement is a step in the right direction for Mr. Schulze.

“[Mr. Schulze] had a zero probability of raising equity without due diligence, and now that zero is up to a 15 or 20 percent chance,” said Wedbush Securities analyst Michael Pachter. “Private equity firms want to understand their investment and return, and in order to understand that, you have to be able to look at the books.”

If Best Buy’s board rejects Mr. Schulze’s proposal, he will have until January 2013 to present a second proposal. Best Buy’s board would have 30 days to review the second proposal before Mr. Schulze can take the offer directly to shareholders at the company’s annual meeting or a special meeting. If the second offer is turned down by both the board and Best Buy’s shareholders, he would have to wait one year before offering another proposal.

Best Buy’s public fight over its future comes as it has been engulfed in mounting controversy since April, when former CEO Brian Dunn resigned amid a company investigation into an “improper relationship” with a 29-year-old female employee. Mr. Schulze resigned as chairman a month later after the probe found that he had known about the relationship and had failed to alert the board or human resources.

The series of bad news that has followed is happening as Best Buy fights to reverse a decline in its business caused by a weak global economy and consumers’ changing shopping habits. Best Buy’s stores are becoming unprofitable as customers increasingly use them to browse for electronics, then buy them cheaper online or elsewhere. On top of that, shoppers are no longer snapping up big TVs and computers at a fast clip as they once did, instead opting for smaller gadgets such as cellphones and tablets.

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