Just when Kohlberg & Co. thought that their offer of $35 per share could win over the reputable Steinway company, they were outbid. After a pretty long period of bidding, it was Paulson & Co. that finally sealed the deal and won the bidding for Steinway. It would not have been possible if they had not increase their offer to $40 per share, topping the offer made from Kohlberg & Co. by $5 per share.
By bidding $40 per share, the hedge fund values the 160-year old musical instruments company at approximately $512 million. Following the results, Steinway’s share prices were raised by 8 per cent to $41.35 yesterday morning. This was an indication that there were quite a number of investors who had expected a higher offer. On Monday, Steinway announced that they had received a bid of $38 per share from an unidentified asset manager. A source revealed the new bidder to be John Paulson’s hedge fund firm.
A leveraged buyout of Steinway would be a rather unusual private equity-style deal for hedge fund mogul John. John came into the spotlight back in 2007 after a prescient bet against subprime mortgages. He repeated his success once again in 2009 by betting on gold. On Tuesday, Steinway mentioned that Kohlberg had waived theirs right to either match or beat the offer by John. Steinway went on to explain that the deal with Paulson did not provide for a “go-shop” period. It did, however, enable them to accept a superior offer up till the closing of Paulson’s tender offer within a total of 25 days. However, if Steinway decides to accept another offer during this period, they would be required to pay a termination fee of about $13.4 million to Paulson. Due to the termination of agreement with Kohlberg, Steinway would need to pay a sum of $6.7 million to them.
According to Thomson Reuters data, the pianos by Steinway have been used by legendary artists such as Cole Porter and Sergei Rachmaninoff as well as by contemporary ones like Chinese concert pianist Lang Lang. The company is also nearly one-third owned by South Korea’s Samick Musical Instrument Co Ltd. The other brands of Steinway also include Bach Stradivarius trumpets, Selmer Paris saxophones, C.G. Conn French horns, Leblanc clarinets, King trombones and Ludwig snare drums. If you would like to read the rest of the story, you can do so from here.