NEW YORK (Reuters) - Best Buy Co Inc (BBY.N) founder Richard Schulze is working with banks including Credit Suisse CSGN.VX to explore a potential private takeover of the world's largest consumer electronics retailer, three sources close to the matter said on Tuesday.
Schulze and the banks were still in the early stages of determining what steps to take, the sources said.
But the board of directors of the company he founded in 1966 has made it more difficult for Schulze to force a shareholder vote on any buyout proposal without the board's consent, after raising the ownership threshold for calling a special meeting to 25 percent from 10 percent, according to a filing with the Securities and Exchange Commission last week.
Schulze is Best Buy's largest shareholder, but his 20.1 percent stake falls short of the new level.
One source said Schulze may choose to wait until the company lays out a turnaround strategy in September. The strategy could include naming a permanent CEO and a plan to fend off online rivals such as Amazon.com Inc (AMZN.O).
However, Schulze could act sooner if he lines up the necessary deal financing, another source said.
The company, a bellwether for the consumer electronics industry, has posted declines in same-store sales in seven of the last eight quarters. It has also been criticized for being too slow to react to a changing retail world, where some shoppers use Best Buy as a "showroom" to try out electronics and then buy the same items at lower prices online.
Schulze resigned from the company's board earlier this month and said he was exploring options for his ownership stake. He lost his chairman title after a probe by a board committee found that he had failed to tell the board about allegations that former CEO Brian Dunn had engaged in an improper relationship with a female employee.
The decision to change the threshold for calling a special shareholder meeting solidified the line between Schulze and the board.
"They are clearly locking him out," said M&A lawyer Kenneth Lefkowitz, deputy chair of law firm Hughes Hubbard & Reed. He said the change in by-laws was "absolutely" a takeover defense.
Even as Schulze plans his next move, the company was trying to move on.
Mike Mikan, who was named interim CEO following the abrupt departure of Dunn in April, met with investors at an analyst event in New York on Monday, giving the impression that he would stay on as permanent CEO, according to an investor present at the meeting.
Last week, Mikan, who has been on the retailer's board since 2008, vowed to cut the size of the retailer, a move that could lead to faster store closings than Schulze and Dunn had proposed.
Representatives for Schulze, Credit Suisse and Best Buy declined comment.
The Minneapolis Star Tribune first reported the news of Credit Suisse being hired by Schulze.
Best Buy said last Thursday that it boosted the ownership level requirement for calling a special meeting to conform to Minnesota laws. However, some such as Lefkowitz were skeptical, especially since the 25 percent threshold has been Minnesota law for several years and the board just now decided to make the change.
Bruce Hight, a spokesman for Best Buy's board, declined further comment beyond what the retailer said last week.
"To me, what it clearly does demonstrate is the board is very concerned with what Schulze's next move may be," Andrew Freedman with law firm Olshan Frome Wolosky LLP said. "The timing is too coincidental."
Schulze's options now include litigation or an offer to buy the company, Lefkowitz said.
"That's the way you get boards to act. You may either make a (public) tender offer or you make a (private) proposal, assuming he has the money, etc. to do it," said Lefkowitz, who past clients include Viacom, Cablevision, Honeywell and Goldman Sachs.
Reporting By Nadia Damouni and Dhanya Skariachan; Editing by Gary Hill, Bernard Orr