Steinway Sale: Paulson Tops Samick and Kohlberg in Bid, Doubles Share Value

Hedge fund billionaire John Paulson really wants Steinway. While just this past December Steinway stock was selling at $20 a share, he is now paying $40.

A bidding war was sparked by Paulson’s unexpected bid this past Tuesday. The move prompted Steinway’s biggest shareholder, Samick Musical Instruments, to attempt to grab the company for $39 a share. Paulson & Co. quickly shot back with a $40 a share offer, pushing the value of the company to $512 million

Private equity firm Kohlberg & Co., which had made an offer on the company on July 1 of this year, waived its right to negotiate upon Paulson’s initial bid this week. Kohlberg had made a $35 a share bid, which many in this industry saw as a generous offer for the 160-year-old American piano maker.

Going once, going twice? It appears so.

The deal also includes Elkhart-based Conn-Selmer, who acquired Steinway in 1995. The company will now be taken private, and Kohlberg will receive a termination fee of about $6.7 million from the company.

Paulson is so far tight-lipped on what his specific plans for the company will be, but has said he will “keep the business largely as it is,” according to the New York Times. The Times also reported he owns three Steinway pianos himself, though he doesn’t play.

“We’re fortunate in this case that John is a personal fan of our product,” Michael Sweeney, Steinway’s chairman and chief executive, said on Wednesday. “His love for the instrument gives him the insight as to how we can build the business.”

This leveraged buyout is an unusual move for Paulson, who in 2007 bet against subprime mortgages making a fortune when the housing bubble burst. He would repeat that success in 2009, this time putting his money in gold. As of March, Forbes puts Paulson’s net worth at $11.2 billion, and lists him as the 28^th richest man in America.

About John Paulson

Paulson was born in 1955 in Queens, New York. He is a graduate of New York University’s College of Business and Public Administration and the Harvard Business School with an MBA. He started his investing career in 1980 and has worked for Boston Consulting Group and Bear Stearns. In 1994, he founded Paulson & Co.

During the 2007-2008 housing crisis, he amassed a fortune betting against subprime mortgages.  In 2009 he did well investing heavily in gold, though Forbes reported in April that the fall in gold prices cost him dearly, and his company lost a total of $601 million.

Paulson is politically active, contributing significantly to both political and special interest groups (he was “honored” on Stephen Colbert’s The Colbert Report for being among the 22 largest Super PAC donors in a 2011 episode). His philanthropic efforts include giving millions to the New York University Stern School of Business and the London School of Economics. Last year he donated $100 million to New York City’s Central Park.  He also gave $15 million to build a children’s hospital in Ecuador, the country where his father was born.