Steinway Musical Instruments agreed this week to its acquisition by private equity firm Kohlberg & Company. The deal is reportedly worth $438 million and is expected to close in this year’s third quarter.
The $35 a share deal with Kohlberg & Company offered Steinway shareholders a 33 percent premium over the average closing price on Steinway shares in the previous 90 days. Averaged over the past year, the offer represents a 45 percent premium.
The 160-year-old piano maker saw its stocks rise at the news Monday, but many questions remain about what the move means for the company. Steinway was last purchased in 1995 by Selmer Industries, who brought the company public as Steinway Musical Instruments in 1996. The company has grown to include Conn-Selmer, which counts among its products Bach Stradivarius trumpets, C.G. Conn French horns, and Leblanc clarinets.
The company has faced difficult financial challenges in staying competitive, though a series of recent cost-cutting measures had appeared to result in a jump in pre-tax income in first quarter earnings reports this May.Steinway had recently completed a 17-month-long strategic evaluation which originally culminated six months ago in a decision not to sell itself. A reported plan to sell off its band instrument division was also halted last year due to evaluations of the division’s operating performance.
This past March, the company had also reached an agreement to sell its famed Steinway Hall, located across the street from Carnegie Hall in New York City and housed office spaces and the well-known showroom where generations of pianists visited. That sale was reportedly closed last week in a deal with the JDS Development group for $46.4 million (though the Steinway plans to remain in that location through 2014).
Kohlberg & Company say it focuses on acquiring middle market companies, which they define as between the $100 million to $750 million level. Founded in 1987 by Jerome Kohlberg Jr., and his son James A Kohlberg, the firm has organized seven private equity funds, through which it has raised $5.3 billion of committed capital. They have completed 60 platform investments and 119 add-on acquisitions, with an aggregate transaction value of approximately $9 billion. Their website states they invests in companies where it can work in partnership with senior management to identify growth opportunities and implement fundamental operating and strategic changes, resulting in substantial increases in revenue and cash flow.
“For over 160 years, Steinway's skilled manufacturing artisans have been crafting the world's finest musical instruments to perform with unequalled touch and tone,” said Kohlberg partner Christopher Anderson. “Kohlberg's long history of collaboration to grow and expand some of the world's leading consumer brands makes us an ideal partner for Steinway to accelerate its global expansion, while ensuring the artisanal manufacturing processes that make the Company’s products unique are preserved, celebrated and treasured.”
The firm has a history of taking financially challenged companies private. Their current investments include a wide assortment of companies. Among them are funeral industry manufacturer Aurora, hockey and lacrosse manufacturer Bauer, and concrete pipe and manhole builder Hawkeye Pedershaab. Other companies serve janitorial, health, hospice, car windshields, and wireless communications markets.
