Steinway Musical Instruments Inc. agreed to be acquired by Paulson & Co. in a deal valuing the 160-year-old piano maker at about $512 million after the hedge fund boosted its offer to trump a competing bid from South Korea’s Samick Musical Instruments Co.
The $40-a-share cash offer from the hedge fund owned by billionaire John Paulson capped a period of more than a month that saw two other rival bids offer less for Steinway. It also topped Paulson’s initial offer this week of $38 a share, which was followed by Samick’s $39-a-share offer, said a person familiar with the process. Waltham, Massachusetts-based Steinway closed more than 3 percent above the offer price, indicating some investors think the bidding war may not be over.
Steinway, whose pianos can take almost one year to make, had disclosed an offer from Kohlberg & Co. on July 1 that would have valued the company at $438 million and said it would conduct a 45-day go-shop period set to expire tonight where it could seek another suitor. There’s a 10 percent to 15 percent chance Samick could raise its offer, said Sachin Shah, a special situations and merger arbitrage strategist at Albert Fried & Co. in New York.
“Now the question is, are these guys really out?,” Shah said.
Kohlberg withdrew its bid yesterday after disclosing a rival bid of $38 a share said to be from Paulson. Steinway’s board recommends that all shareholders tender their shares to Paulson’s new offer, according to a statement today.
Steinway’s shares rose 7.9 percent to $41.29 at the close in New York and have almost doubled this year. The deal is expected to be completed in late September, Steinway said. Once it closes the company will become private, it said.
Paulson has historically been part of private-equity deals by taking stakes in companies restructuring out of bankruptcy. In those instances the hedge fund buys bonds that are converted to equity through an initial public offering. Paulson’s Steinway bid marks the first time the hedge fund has attempted to take a public company private alone.
‘The new offer today is a win for Paulson company and for shareholders,’’ said Bradd Kern, a portfolio Manager at Irvine, California-based Armored Wolf LLC, who owns Steinway shares. “We have actually added slightly since the original offer.”
An e-mail sent to Samick seeking comment wasn’t immediately returned outside regular business hours. Armel Leslie, a spokesman for Paulson and Julie Theriault, a spokeswoman for Steinway, didn’t immediately respond to requests for comment.
Steinway disclosed Kohlberg’s offer three days after it closed the $46.3 million sale of its stake in the famed Steinway Hall building on West 57th Street in New York City, which houses its flagship retail showroom. The company has ended its agreement with Kohlberg and will pay a termination fee of about $6.7 million, according to today’s statement.
The piano maker that gave the company its name was founded in 1853 by German immigrant Henry Engelhard Steinway in a Manhattan loft on Varick Street, and over the following decades became a brand recognized worldwide.
The company was bought by saxophone maker Selmer Industries in 1995 and taken public the following year by investment bankers Kyle Kirkland and Dana Messina, then chairman and chief executive officer, respectively. They expanded through acquisitions and faced declines in sales during the recession. In 2011, the executives made a bid to buy the band division -- which includes Bach Stradivarius trumpets and C.G. Conn French horns. Steinway turned down the offer and ended a review for strategic alternatives in December.
“At $5 per share more than the offer from Kohlberg, this transaction provides shareholders significant additional value for their investment,” Michael Sweeney, Steinway’s chief executive officer, said in the 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.”