Fender Sets $160.7 Million Offering as IPO Market Thaws

Fender Sets IPO at $13-$15 a Share to Expand Guitars Overseas
Fender, which traces its roots to 1946, makes the Stratocaster, or “Strat,” one of the most popular electric guitars and models inspired by musicians such as Eric Clapton and John Mayer. Photographer: Robyn Beck/AFP/Getty Images

Fender Musical Instruments Corp., the largest seller of guitars in the U.S., filed to raise as much as $160.7 million in an initial public offering to repay debt.

The company and its stockholders are offering 10.7 million shares at $13 to $15 each, according to a regulatory filing today. Fender, based in Scottsdale, Arizona, estimates net proceeds of about $88.2 million and didn’t disclose a date for the IPO.

Fender, which makes electric guitars based on musicians such as Eric Clapton and Jimi Hendrix, joins Kayak Software Corp. and Palo Alto Networks Inc. in setting price ranges for U.S. IPOs today as companies and investors regain risk appetite after a month-long drought following Facebook Inc.’s May 17 initial offering.

The midpoint of the offering range would value Fender at $369 million, or about 0.5 times sales of $704 million in the 12 months through April 1 and 26 times net income of $13.9 million in the same period, data compiled by Bloomberg show.

Fender is offering about 7.1 million shares in the sale, while Weston Presidio Capital, the largest existing shareholder, plans to sell about 3.6 million shares, the filing shows. Weston, which currenly owns 43 percent of Fender’s stock, will trim its stake to 18 percent in the IPO.

Revenue at Fender rose 2.2 percent to $173.8 million in the first quarter ended April 1 and advanced 13 percent to $700.6 million last year. Fender’s net income was $19 million last year compared to a net loss of $1.7 million in 2010.

Emerging Markets

The company sees opportunity to grow sales by gaining more of the global market for musical instruments and accessories, which totaled $15.8 billion -- with $6.4 billion coming from the U.S -- in 2010, according to the filing.

Fender, which makes the popular Stratocaster, sees growth coming from emerging markets such as China and India as guitar-based music becomes more popular in those nations.

The company gets 47 percent of its sales from outside the U.S. and sells products in 85 countries. Many of its models, including an Eric Clapton Stratocaster, sell for more than $2,000. Clapton is a three-time inductee into the Rock and Roll Hall of Fame.

Founder Leo Fender sold the company to Columbia Records Distribution Corp., a division of Columbia Broadcasting System, Inc., in 1965, according to the filing. The late William Schultz and current board member William Mendello then purchased Fender in 1985 from CBS Corp.

Larry Thomas, 62, has been chief executive officer since August 2010 when he ended a 6-year retirement following a career at retailer Guitar Center Inc. that included eight years as CEO.

The shares will be listed on the Nasdaq Stock Market under the ticker FNDR. JPMorgan Chase & Co. and William Blair & Co. will lead the IPO.

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