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Richard Schulze made an expression of interest in buying Best Buy (NYSE:BBY) Monday at $24-$26 per share, pending some due diligence. The market, however, is seemingly not buying into it, since the stock traded down to $19.80, where I started buying it. It's estimated that Richard Schulze will have to raise $1-$2 billion from private equity and $7-$8 billion from the debt markets. Perhaps the market is not confident that Richard Schulze can raise that kind of money. I disagree.

Due diligence

Richard Schulze was chairman of the company up until one month ago. Not much has certainly changed, and it isn't likely that surprises will crop up to torpedo the deal.

Raising the money

Richard Schulze is contributing with $1 billion in equity from the 20% stake he already holds in BBY. At $25, the equity is valued at $8.5 billion, but only 80% is subjected to the offer, so only around $6.8-$7.5 billion needs to be financed depending on how the offer is structured.

Now, another factor comes in. The market is dying to get its hands on more high yield supply. And while it clamors for more supply, the existing supply is actually going down. It so happens that this leveraged takeover produces exactly what the market is asking for -- high yield supply, $6.8-$7.5 billion of it!

This makes me think that several houses will be at Richard Schulze's door to put this operation together and finance it. And sthat being the case, the operation will have a much higher probability of success than what the market is pricing right now.

Conclusion

Due to the two factors explained above, I believe Richard Schulze's offer has a much higher likelihood of going through than the market is pricing in right now, making $19.80 an attractive entry point. If the stock goes lower, I will buy more under the same logic.

Disclosure: I am long BBY.

Source: Why I Bought Best Buy Today