UPDATE 5-Best Buy founder Schulze rejoins as chairman emeritus
* Annual base salary of $150,000 as chairman emeritus
* Founder nominates two former Best Buy executives to board
* To get up to $2.125 mln for help with business plan
* Shares rise
March 25 (Reuters) - Best Buy Co Inc founder Richard Schulze, who left the board last year and later failed in his effort to take the company private, will rejoin the retailer as chairman emeritus and add two of his former colleagues to the board.
The news helped dispel rumors the top investor in the world's largest consumer electronics chain was contemplating selling his stake in the company he founded in 1966. Best Buy shares rose as much as 3 percent on Monday.
"We view today's announcement as a clear positive for Best Buy, as it suggests that Mr. Schulze is unlikely to sell his 20 percent stake in the company at any point in the near future," Barclays analyst Alan Rifkin said.
Rifkin said Schulze's return was likely to be "a huge morale boost," citing his popularity among the company's employees.
One former investor, who sold his shares recently after a run that saw the stock nearly double in the first quarter, said it was only good news as long as Schulze did not meddle with new Chief Executive Hubert Joly.
"It's Richard's way of saying I am still involved in the business," said Frank Lombardi, a portfolio manager at Boston-based Cubic Asset Management. "I don't think it's useful. Hopefully it's not detrimental to the business. But I think they will sort of stay somewhat passive for now and allow the business to be run by Joly."
Schulze, who had a prior agreement with Best Buy that let him nominate two directors, resigned as chairman in June after an internal probe found he did not inform the board of allegations former Chief Executive Brian Dunn was having an inappropriate relationship with a female employee.
Schulze then tried to take Best Buy private, an effort that fell apart earlier this year.
As chairman emeritus, Schulze has no formal role on Best Buy's board, but could be tapped to mentor up to two "high-potential" officers, speak at company events and participate in training, all subject to approval by the CEO.
NO MARGIN FOR ERROR
"This is a better idea, and better for shareholders this way than if Schulze took the company private," said Morningstar analyst R.J. Hottovy. "In a leveraged buyout transaction, you would sell the company for a lot of debt and at this time the company does not have a lot of margin for error."
Best Buy's shares were up 1.6 percent at $23.14 after rising as high as $23.46 earlier on Monday. The stock is up 92 percent in 2013, as investors have grown more confident in Joly's turnaround plans.
Lombardi said he did not expect Schulze or his board nominees, former Chief Executive Brad Anderson and former Chief Operating Officer Al Lenzmeier, to bring much to the table.
Even Schulze's original plan to bring these executives back to run the company had drawn some skepticism last August, especially since they ran the retailer before online shopping became popular.
Best Buy will give Schulze up to $2.125 million in connection with his "preparation and ongoing consultation" over the next year in connection with a business plan for the company, a regulatory filing showed.
Schulze will also get an annual base salary of $150,000 as chairman emeritus but will not be entitled to an annual bonus, according to a letter to him from Joly that was made public in the filing with the U.S. Securities and Exchange Commission.
As chairman emeritus and until he reaches age 75, Schulze now 72, will be entitled to nominate two directors to Best Buy's board.
One corporate governance expert found Schulze's return unusual, especially since he was forced out as chairman less than a year ago and was involved in a failed buyout attempt.
"Given the buyout and what not, that's a rather unusual thing to do," said Charles Elson, director of the Weinberg Center for corporate governance at the University of Delaware.
Elson also found the fee given to Schulze for his consultancy role over the next year unusually high.