Mobile Electronics Magazine

Bloomberg Reports: Best Time For Best Buy Bid Now As Founder Exits

There’s never been a cheaper time for private-equity firms to gamble on Best Buy Co. (BBY), with founder Richard Schulze’s 20 percent stake up for grabs and the electronics retailer near its lowest-ever valuation.

The world’s largest seller of consumer electronics traded last week at 4.8 times earnings after reaching a record low of 4.3 times last month, according to data compiled by Bloomberg. With Best Buy’s price-earnings ratio making it the least expensive U.S. retailer greater than $1 billion, buyout firms could get a company that generates the most free cash relative to its stock price in the industry.

Once valued as high as $29 billion, Best Buy has plunged to $7 billion and posted its first annual loss in two decades as same-store sales fell in seven of the last eight quarters. Schulze, who resigned last week as chairman after failing to inform the board of allegations the chief executive officer had an inappropriate relationship with an employee, is exploring “all available options” for his stake. That may spark interest from buyout firms, said Telsey Advisory Group, for a deal that would be the biggest in the U.S. retail industry since 2005.

“It’s easy to see the benefit of them being private right now,”Matt Arnold, an analyst at St. Louis-based Edward Jones & Co., said in a telephone interview. “It comes down to whether there’s an interested buyer that sees value in Best Buy and is willing to take on the risk. Even though there are pressures, it’s still generating pretty substantial profitability, especially as measured by free cash flow, which is how private equity is going to be thinking about this.”

To read the complete story by Tara Lachapelle and Chris Burrit, visit Bloomberg.com.