By Kevin Zimmerman
New York-based investment firm Paulson & Co. Inc. agreed to purchase piano maker Steinway Musical Instruments Inc. for a little more than half a billion dollars last week.
Paulson’s offer of $40 per share topped Kohlberg & Co.’s earlier bid of $35 per share. Steinway initially agreed to the lower offer but will now pay Kohlberg a $6.7 million termination fee in order to proceed with its merger with Paulson & Co.
Under the current proposal, Paulson will pay $512 million for all outstanding shares of Steinway and take the company private.
“At $5 per share more than the offer from Kohlberg, this transaction provides shareholders significant value for their investment,” Michael Sweeney, chairman and CEO of Steinway, said in a statement. “At the same time, our employees, dealers, artists and customers can rest assured that Steinway will be in excellent hands under John Paulson’s stewardship.”
One of the reasons Paulson wanted to buy the music company, he said in a statement, was because its products are of the highest quality.
He owns three Steinway grand pianos — models M, O and B — and in a letter to employees said he intends to purchase a fourth one with a factory-installed player piano system.
In his letter to Steinway employees, Paulson added he has no intention of making any changes to the manufacturing operations.
“The company’s proven business model and highly skilled employees provide a strong foundation on which to expand,” Paulson said. “We fully intend to maintain the superb quality of Steinway’s musical instruments, which are the finest in the world.”
Although headquartered in the Boston suburb of Waltham, Mass., Steinway & Sons continues to produce its world-class pianos at its factory in Astoria. In fact, the 2,500 pianos Steinway produces each year come from either the Queens factory or the one in Hamburg, Germany, according to the company’s website.
Steinway Musical Instruments Inc. is comprised of Steinway & Sons, which makes pianos, and Conn-Selmar, which produces other musical instruments including Bach Stradivarius trumpets, Selmer Paris saxophones, King trombones and Ludwig snare drums, among others.
Last week, in a second letter, Paulson assured employees and dealers in the Conn-Selmar division that he intends to continue doing business as usual there as well.
The deal is expected to be finalized by the end of September.
