Schulze gets access to key execs

With a deadline for a potential Best Buy Co. Inc. acquisition fast approaching, founder Richard Schulze has made considerable progress toward making a bid for the retailer, the Star Tribune has learned.

A source close to Best Buy confirmed that CEO Hubert Joly has agreed, at least in principle, to allow Schulze's team to interview eight to 10 key executives, discussions that will eventually help Schulze develop a business plan he can present to potential investors. Another source close to the situation, however, cautioned the two sides are still negotiating the interviews, discussions he called "delicate" and "sensitive" because of some resistance from the board of directors.

However, such talks suggest a deeper level of cooperation between the two camps than was previously acknowledged. In August, they reached a deal that allowed Schulze and six potential investors to examine the company's confidential financial information.

Under the agreement, Schulze has 60 days, or until mid-November, to make an offer to purchase Best Buy. Schulze initially estimated his group would pay $24 to $26 a share, or $10 billion. If the board rejects that offer, Schulze may try again in January.

Schulze had initially accused the board of stonewalling his efforts. But since Joly became CEO in September, both sides have described their interactions as positive and encouraging, giving hope to some investors that Best Buy and Schulze can agree to a friendly buyout.

"The relationship seems to have turned around," said Christopher Horvers, an analyst with JP Morgan. "There seems to be a little more momentum."

In addition, Schulze has recruited two more potential investors to join the original group of six private equity firms already reviewing Best Buy's finances, according to the source close to the situation. Though the source declined to name those investors, Schulze has held discussions with Liberty Media, the media content company run by billionaire John Malone.

"You might find some of the new people might step in and some of the original people might step away," the source said.

Among the six private equity firms are KKR, Apollo Global Management, Leonard Greene, Cerberus Capital Management and TPG.

The situation stands in contrast to a few months ago, when the board of directors forced Schulze to resign as chairman. A board-led investigation had determined Schulze failed to inform directors of allegations that former CEO Brian Dunn, who resigned in April, had an improper relationship with a female employee.

In June, Schulze left Best Buy and soon announced his plan to take the company private. But the board initially refused Schulze's request for financial information, calling his effort a "highly conditional indication of interest."

After Best Buy named Joly CEO in September, Hatim Tyabji, who replaced Schulze as chairman, and G. "Mike" Mikan, a board member who served as interim CEO, traveled to Boston to meet with institutional investors, who pressured the two to take Schulze's buyout efforts seriously, Horvers said.

Indeed, institutional investors have told the Star Tribune they would gladly take $24 to $26 a share, if Schulze can come up with the money.

In the meantime, Joly has worked hard to smooth relations between Best Buy and Schulze.

"It's very odd for a company to be at odds with its founder," Joly previously told the Star Tribune. "Dick is the founder of this amazing company. I have a lot of respect for him, though I've never met him. He is also the company's largest shareholder. He may or may not [purchase Best Buy], but at the end of the day, he is still going to be our largest shareholder whether Best Buy is public or private."

"I think it's important to settle things down a little bit."

CFO Muehlbauer to depart

Joly is also moving to put his own stamp on the company. Late Tuesday, Best Buy said Chief Financial Officer Jim Muehlbauer will step down at the end of fiscal 2013 so Joly can recruit his own team.

In June, two months before Best Buy hired Joly, the board approved stock and $500,000 in retention bonuses each to Muehlbauer, international chief Shari Ballard, chief human resources officer Carol Surface and its U.S. president, Michael Vitteli, according to documents filed with the Securities and Exchange Commission.

At the time, the company said the bonuses, widely criticized by corporate governance experts, were needed to "ensure leadership continuity at Best Buy, keeping the team in place and building for the future."

Despite his imminent departure, Muehlbauer gets to keep the bonus.

Thomas Lee • 612-673-4113