Famed piano maker Steinway sold for $499MAP , Associated Press
Aug. 14, 2013 10:46 AM ET
WALTHAM, Mass. (AP) — Steinway has been sold for about $499 million and will again become a private company.
The company struck a deal with Paulson & Co., the investment firm founded by John Paulson, for $40 per share. That topped an earlier $35 per-share offer from Kohlberg & Co.
Steinway will discard its sales agreement with Kohlberg and pay a termination penalty of about $6.7 million.
The sale price was music to the ears of investors and shares of Steinway Musical Instruments Inc. jumped nearly 6 percent in early trading.
Steinway has been in business for 160 years. Its pianos have been a status symbol and a must-have luxury in concert halls for more than a century, but the company suffered during the recession. Sales have increased in the past few years, but have yet to return to their pre-recession levels.
In June, the company finalized the sale of its flagship showroom in Manhattan, the legendary Steinway Hall, where Serge Rachmaninoff and Vladimir Horowitz, among other greats, once took grand pianos for a test ride.
Industry watchers believe that the recovering economy, coupled with increased overseas demand from places like China, made the company more attractive to private investors. Its shares have recovered with the prospect of a sale, rising 71 percent this year.
Steinway Chairman and CEO Michael Sweeney said Paulson's offer reflects the attractive value of Steinway's heritage and growth potential, while also providing its shareholders with significantly better returns.
Paulson does not have a specific clause that would allow the company to seek other bids, but Steinway can respond to unsolicited offers. It would, however, be required to pay about $13.4 million to break off the sales agreement.
The deal is expected to close in late September.
Steinway, which will become private, valued the sale at about $512 million. Paulson will open a tender offer for company shares within the next five days.
Steinway & Sons was founded in 1853 by German immigrant Henry Engelhard Steinway in a Manhattan loft. Steinway was a master cabinet maker who built his first piano in the kitchen of his home in Germany, according to the company.
During the ensuing three decades, Steinway and his sons developed the modern piano. The company's products now include Bach Stradivarius trumpets, Selmer Paris saxophones, C.G. Conn French horns, Leblanc clarinets, King trombones, Ludwig snare drums and Steinway & Sons pianos.