John Paulson hits high note with Steinway deal
The hedge fund billionaire's unexpected $512 million offer for the storied piano maker ends Kohlberg & Co.'s earlier bid.
Steinway Musical Instruments (LVB), whose stock ticker is an ode to Ludwig van Beethoven, has just been through a financial opera of sorts, ending with a sale of the company to a surprise bidder, who pushed an earlier one off the stage.
Billionaire hedge fund manager John Paulson has offered about $512 million, or $40 a share, for the company that's been making what are arguably the world's finest pianos and other musical instruments since 1853.
That topped a $438 million, or $35 per share, bid made in June by private equity shop Kohlberg & Co., according to The New York Times. Steinway's board has determined that the new bid is superior to Kohlberg's and is urging shareholders to approve Paulson's offer.
And indeed, Kohlberg has withdrawn from the bidding process. Steinway at first identified the new bidder only as "an affiliate of an investment firm with over $15 billion under management," but Paulson's identity was revealed in the media reports on Tuesday.
Paulson's move was unusual. Although negotiators try to find a better deal than the one accepted during the so-called "go-shop" period, they rarely get a superior offer. Steinway called off plans to sell itself in 2012 after considering its "strategic alternatives" for 17 months. The company's financial performance has been improving recently.
Steinway earned $20.2 million, or $1.60 per share, in the latest quarter versus $2.4 million, or 19 cents a share, a year earlier, as it benefited from the sale of its office building in New York. Sales rose to $92.4 million, fueled by a double-digit gain in its piano business. Though sales have been depressed in the U.S., emerging markets offer an opportunity for growth, according to The Financial Times.
"The bids are the latest indication of the bets that investment groups are making in the luxury goods sector as they seek to profit from the recovering finances of the wealthy," the newspaper said. "Steinway sells pianos for as much as $218,000."
Besides pianos, Steinway also makes Galway Spirit flutes, Selmer Paris saxophones, C.G. Conn French horns, Leblanc clarinets, King trombones and Ludwig snare drums. The shares closed at $38.27, down 3.3%, Tuesday. They've gained more than 87% this year.
Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
Life without Instruments we would have boring computerized / fake music. People losing touch knowing how to play something real.
Save our Orchestras and Bands. Buy an instrument today and learn how to play it.
Truly HOPE Steinway stays as it is! It is a beautiful instrument. Sadly, Baldwin, Cincinnati, OH, was dismantled. I own a Baldwin and wanted, at the time, an American made piano. There aren't any left! There are very few people that can service these beautiful instruments. The finish on my black lacquer piano is crinkling. When I discovered this problem, the manufactured had gone bankrupt and no recourse.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] The major averages finished the Tuesday session near their lows with the Russell 2000 (-1.0%) leading the slide. The S&P 500 lost 0.5% with nine sectors ending in the red.
Equities indices started the day with modest gains and spent the first two hours of action in the neighborhood of their flat lines. Although the early trade lacked clear sector leadership, that could have been overlooked due to the strength among heavily-weighted sectors like health care (-0.3%), ... More
More Market News
The apparel chain takes a hard hit after blaming the weather for its quarterly sales decline. But cold temperatures don't explain the drop in full-year sales as well.
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'