PE firm Kohlberg to buy Steinway Musical

Inc, the 160-year-old manufacturer of musical instruments, yesterday agreed to be acquired by private equity firm Kohlberg & Co, for $438 million.

Under the terms of the deal that has been approved by Steinway's board, Kohlberg is offering to pay $35-per share in cash, representing a premium of 33 per cent based on the average closing price of the company's shares during the 90 trading days ended 28 June.

The agreement has a provision for a 45-day ''go-shop'' period during which time Steinway may solicit alternative proposals.

Massachusetts-based Steinway makes high quality musical instruments, including the Bach Stradivarius trumpets, Selmer Paris saxophones, C.G. Conn French horns, Leblanc clarinets, King trombones, Ludwig snare drums and Steinway grand pianos.

Through its online music retailer, ArkivMusic, the Company also produces and distributes classical music recordings.

The 160 year-old company has grown through aggressive acquisitions and has a workforce of over 1,600 people and 1 manufacturing facilities in the US and Europe.

For 2012, the New York Stock Exchange-listed company posted net income of $13.5 million on revenues of $353 million.

The company has 11 manufacturing facilities in the US and Europe and employs around 1,700 people.

Steinway's chairman and interim CEO Michael Sweeney said, ''Our agreement with Kohlberg represents an exceptional valuation for our shareholders, while also representing an important next step in the growth of Steinway.''

''Kohlberg has long been one of America's premier private investment firms. We are delighted that they recognize the bright future for Steinway as well as value our great heritage,'' Sweeney added.

Mount Kisco, New York-based Kohlberg was founded in 1987 by Jerome Kohlberg Jr, after he left Kohlberg Kravis Roberts & Co (KKR), the private equity firm he established along with partners Henry Karvis and George Roberts in 1976, over differences in strategy.

Kohlberg, which specialises in leveraged buyouts, has completed 60 platform investments and more than 100 add-on acquisitions valued over $9 billion. The company has invested $3 billion of equity capital and is currently investing its private equity fund Kohlberg Investors VII which raised approximately $1.6 billion in April.

Kohlberg partner Christopher Anderson said: ''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 transaction is expected to close in the third quarter subject to customary closing conditions and regulatory approvals.

Allen & Company LLC is acting as the financial advisor to Steinway on the deal.