Trigger clause means Dunstone could get rest of business for a song
Britain’s Carphone Warehouse may yet be in line for a windfall opportunity from the sale of America’s Best Buy retailer after its estranged founder, Richard Schulze, was given until next February to buy it back.
Schulze has been working since the summer to raise the funds to seize control again of Best Buy but, with the company’s share price dropping, it has been in his interest to delay matters in the hope of clinching a better deal.
With Best Buy’s owners now extending the decision deadline to February 2013, Schulze will also be able to assess the US retailer’s performance during the critical end-of-year shopping season.
In June this year Schulze resigned from the company he founded amid a scandal surrounding the firm’s then CEO Brian Dunn and his relationship with a female member of staff. Even since he has sought to regain control with the help of funding from private equity, though in the meantime Best Buy remains locked in a deal with Britain’s Carphone Warehouse in which they share equal ownership of CPW Europe, the region’s largest independent phone retailer with around 2,400 stores.
If Best Buy is taken over or its majority interest acquired by Schulze who already owns 20 per cent, then a clause in the European deal would allow Carphone’s CEO Charles Dunstone to get back the other half of the joint operation for a relative pittance.
Dunstone, who founded Carphone Warehouse and retains nearly a third of the listed company, sold a 50 per cent stake in Carphone Warehouse Europe to Best Buy for £1.1 billion in 2008.
It means that if Schulze’s bid for Best Buy succeeds, Dunstone in turn could get the other half of the two companies’ European venture at a 10 per cent discount to market value.
The business includes all of Carphone Warehouse’s shops in the UK and Europe but whose value has since fallen to £600 million, according to analysts.
However, Carphone Warehouse Group could take full control of the business for even less than that figure, theoretically seizing Best Buy’s half for a mere £550 million – literally half the sum it received from Best Buy four years ago.
In the US Best Buy is battling to revive its sales and profits, but it’s thought there’s a high chance that its Christmas sales will indicate a worsening condition, pushing its shares even lower and making Schulze’s buy-out proposition even more realistic.
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