Fender guitar maker sets stage for IPO
Forget about Facebook. The manufacturer of the iconic Stratocaster is making noise with plans to go public.
Leo Fender, the founder of the Fender Musical Instruments Corp., brought to life the Telecaster, the first commercially successful solid-body electric guitar. It would help make Fender an iconic brand for the rock 'n' roll movement and bring the guitar brand into the pop culture mainstream.
Now Fender is aiming for the U.S. market mainstream via a stock IPO.
The company just announced plans to go public, with JPMorgan (JPM) as the lead underwriter and "FNDR" as the proposed ticker. Fender plans to list on the Nasdaq.
Leo Fender started his company in Fullerton, Calif., in 1946 and created the Telecaster a few years later. But in the mid-1960s, Fender sold his company to Columbia Broadcasting System. Then in 1985, Fender was spun off to a group of managers.
Last year, Fender held the No. 1 position in terms of revenue for electric, acoustic and bass guitars in the U.S. The company has a wide assortment of brands other than Fender, such as Squier, Jackson, Guild, Ovation and Latin Percussion. It also has license rights to Gretsch, EVH (Eddie Van Halen) and Takamine. Not to mention its guitars have been used by some of the world’s greatest artists, including Jimi Hendrix, Eric Clapton, Jeff Beck and David Gilmour.
Still, Fender continues to focus investments on innovative product development. For example, in January the company launched its Fender Select line, which is a premium, hand-crafted production guitar. The Select line should help boost margins and lead to a spike in upgrades.
And Fender is more than just about guitars. In 2007, the company purchased Kaman Music Corp., which is one of the largest independent distributors of musical instrument accessories.
The result is that Fender is now a sizable business. In 2011, revenue came to about $700 million, up from $618 a year earlier, and adjusted EBITDA was around $53 million.
A key growth driver has been international markets, which account for 46.7% of net sales.
Fender believes it still has plenty of potential to enter more countries. It's also getting more aggressive with licensing its brands. In fact, the company might get traction beyond music, such as for apparel, consumer electronics, mobile and bags. Fender has already put together co-branding deals with Apple (AAPL) and Hard Rock Cafe International.
So in light of its global brands -- as well as growth opportunities -- Fender should continue to be a top-notch player in the music business. Expect investors to line up for the IPO when it hits the market within a couple of months.
Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. Follow him on Twitter at @ttaulli or reach him via email. As of this writing, he did not own a position in any of the aforementioned securities.
- 3 doomed IPOs: Zynga, Yelp, Groupon
- Twitter struggling to make any money
- 7 ways to buy Apple that aren't AAPL stock
In the world of acoustic guitars, there are already some well-established giants, including CF Martin, Taylor, Guild and of course Gibson.
The problem is how cheaply an acoustic can be built in the developing world. Every time a population gets really good, the craftsmen form a guild or union, and want to be paid better and get some benefits, and the global corporation then moves operations to some place with cheaper labor.
It was Japan, then Korea, then Taiwan and now Indonesia. With every cost-cutting by the global companies, the quality goes down a notch and the materials are a bit cheaper. The guitars being passed off as "Mahogany" and "Rosewood" barely qualify to use those names for their woods.
The real shame is, all these countries could make excellent guitars, if the global corporation were not squeezing the craftsmen so badly. Want a good guitar? Buy one made before 1990 and made in the United States. And find your local luthier and let him set it up for you.
I agree with Altoona. This will only push Fender to make cheaper (cost) guitars and sell them at a higher price. Quality and customer service will suffer in order to drive volume and revenue. I've owned 7 Strats in my lifetime - if you're a musician in Austin, TX it's practically the law to have one. So, I fear for the future of this company and the product they put on the shelves.
If you have an American Strat, hold onto it. The value might skyrocket in a few years once this company starts producing lower grade equipment. I hope I'm wrong.
The post below was writen by someone who has no clue what they are talking about.
Actually 90% of these comments are factually wrong. I see the third comment below this is clearly wrong as well. Gibson and fender still make guitars in japan. Ever hear of an orville? come on, this is silly. I hope peaple do not believe these mis informed posts. Nothing will happen to the usa strats other than being improved by them going public.
Copyright © 2014 Microsoft. All rights reserved.
As geopolitical tensions threaten to spin out of control, investors are wondering how best to position their portfolios for the global turmoil.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.