Will Best Buy Go Private?

Best Buy (NYSE:BBY) has been hurting lately, losing 28 percent of its value so far this year as it faces tough competition from online retailers. Now, Reuters is reporting that Richard Schulze, founder and former CEO of the company, has begun putting together an $11 billion buyout bid.

Schultz was ousted as chairman of the board after a scandal involving former CEO Brian Dunn. Convinced that the future of his company is not in the public market, Schultz has said that he could buy Best Buy for between $8.16 billion and $8.84 billion, or $24 to $26 a share. Including debt, the company is valued around $10.9 billion. The company’s current market cap is $5.71 billion.

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Private equity firms have begun conducting due diligence on the company.

On Wednesday, Best Buy is trading at the low end of a 52-week range of $16.25 to $28.53. Online competitors like e-commerce powerhouse Amazon (NASDAQ:AMZN) have some people calling Best Buy a “show room for the Internet.” Online retailers can often offer the exact same product for less because they lack the overhead of storefronts and can sometimes dodge sales tax. Destination shopping centers like Wal-Mart (NYSE:WMT) have added pressure as well, offering more convenience and a more robust experience for customers.

Consumers are also buying directly from manufacturers like Apple (NASDAQ:AAPL) or carriers like Verizon (NYSE:VZ) instead of heading to the store for smartphones and tablets.

Schultz and any private equity backers will have to create a viable strategy to save Best Buy and make it competitive in a market that could be phasing out brick-and-mortar stores like it. Circuit City, once the second largest electronics retailer, filed Chapter 7 bankruptcy just a few years ago in 2009.

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