Best Buy Co. Inc. founder and chairman Richard Schulze resigned from the company's board on Thursday and put his 20.1 percent ownership stake in play, heightening the boardroom drama surrounding the world's largest electronics chain.
Schulze's announcement came just two months after CEO Brian Dunn abruptly left the chain, and as Best Buy struggles to compete with online retailers.
Shares of Best Buy fell as much as 8.5 percent on Thursday. The stock was already rocked in April when Dunn left amid a probe that later found he had engaged in an improper relationship with a female employee.
Best Buy said last month that Schulze would step down as chairman after the June 21 annual meeting, after he failed to tell the board about Dunn's relationship. He had planned to remain a director through the 2013 annual meeting.
The 71-year-old Schulze is by far Best Buy's largest shareholder, with 69.78 million shares as of April 11, according to Thomson Reuters data. He served as the retailer's chief executive for 36 years, until 2002.
Minneapolis-based Best Buy is struggling with the increasing trend of customers who visit stores to test pricey electronics, only to end up buying the items online from Amazon.com Inc and others.
At the same time, Wal-Mart Stores Inc. and Target Corp. are flexing their competitive muscle by devoting space to popular Apple Inc devices in some of their stores.
"We surmise that Schulze had some disagreement with the board and current management team around the strategies being considered," said Bernstein Research analyst Colin McGranahan, who has a "market-perform" rating on Best Buy shares.
Earlier this year, Best Buy said it would close 50 large U.S. stores as it tries to turn around the business, a move some analysts said was far weaker than what is needed.
"It is not obvious who or if there are buyers for such a substantial (though non-controlling) stake" at this point, said McGranahan.
Schulze's announcement implies "little interest so far" from private equity firms, though the "fire sale" aspect of his sale could attract new bidders, he said.
A leveraged buyout of Best Buy would be tough to pull off, said BB&T Capital Markets analyst Anthony Chukumba.
"Even as depressed as their share price is right now, to (make an offer for) Best Buy, you're talking about probably a $10 billion deal," he said. "That's a much larger deal than I think is feasible in the current market environment."
As of Wednesday, Best Buy's market capitalization was $6.56 billion.
Best Buy began in 1966 when Schulze opened the first Sound of Music store in Minnesota, and went public in 1985. It has had just three permanent CEOs, and all were insiders with long tenures at Best Buy.
After Schulze, Best Buy's largest shareholder is Fidelity Management & Research Co., which owned 24.2 million shares, or 7.06 percent, as of March 31, according to Thomson Reuters data. Tradewinds Global Investors LLC owned 14.9 million shares, or 4.3 percent, and Vanguard Group Inc. owned 11.8 million shares, or 3.5 percent.
"I continue to believe in Best Buy and its future - and care deeply about its customers, employees and shareholders," Schulze said in a statement. "There is an urgent need for Best Buy to reinvigorate growth by reconnecting with today's customers and building pathways to the next generation of consumers."
Best Buy named Hatim Tyabji as chairman, two weeks earlier than planned. Tyabji has been a Best Buy director since 1998. He is also chairman and CEO of Bytemobile Inc and chairman of Jasper Wireless Inc.
On Thursday, Best Buy called Schulze "an iconic entrepreneur" who "changed the landscape of American retail."
Best Buy shares were down 4.5 percent at $18.99 at midday Thursday on the New York Stock Exchange, off an earlier low at $18.19. The stock is down about 18 percent since the day before Dunn's departure was announced.
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