(By Balachander) Best Buy Co. Inc. (NYSE:BBY) shares jumped as much as 7.4 percent in early trade on Monday after the consumer electronics retailer agreed to permit its founder Richard Schulze conduct due diligence to help him move forward with his proposal to acquire the company.
The agreement will provide Schulze an immediate access to non-public company information he had sought after offering to take Best Buy for $24 to $26 a share, valuing the company as high as $8.8 billion.
Under the terms of the agreement, Schulze has an opportunity to bring forward a fully financed definitive proposal within 60 days after the due diligence period begins, which period may be extended in certain circumstances.
The agreement also waives a Minnesota law to allow Schulze, who owns 20 percent of Best Buy, to work with private equity partners.
If a transaction is proposed and the board rejects it, Schulze has agreed not to pursue an acquisition until January 2013.
In addition, Richfield, Minneapolis-based Best Buy is offering Schulze two board seats, proportionate to his share ownership.
Last week, Best Buy named Hubert Joly, the former chief executive of hospitality and travel company Carlson, as its new CEO and president. At the same time, Schulze repeated his request to the consumer electronics chain's board for accessing financial information, after the board dismissed his acquisition proposal. In response, the board dismissed the proposal as a "highly conditional indication of interest".
Mike Mikan, a member of the Board has served as interim CEO since April when former CEO Brian Dunn resigned Best Buy over allegations of personal misconduct.
Best Buy is contending with significant structural limitations in its business model and faces intense competition from online retailers.
Since June 2009, the company's stock has fallen more than 30 percent, and it has dropped 59 percent in the past five years and 22 percent in the last one year.
On Monday, shares added $1.27 to trade at $18.60 on Monday. Over the past year, the stock has been trading in the range of $16.25 to $28.52.