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It is my understanding that the "other" parts of the Steinway corporation are actually larger than piano division. Many people don't know that.
While I truly hope the best for the future of the brand, I can only smile about the implied significance of the entrepreneur's musical dabbling as a high schooler and the conjectured connection between that and this business deal.
Piano maker Steinway goes private in $512-million deal Add to ...
Maria Ajit Thomas and Greg Roumeliotis
Reuters
Published Wednesday, Aug. 14 2013, 11:27 AM EDT
Steinway Musical Instruments Inc., best known for its grand pianos, agreed on Wednesday to be taken private by Paulson & Co. after the hedge fund firm raised its offer to $40 per share, valuing the 160-year old company at about $512-million (U.S.)
Steinway shares rose above the Paulson bid, touching a high of $41.60, suggesting some investors expect a higher offer.
The piano maker caters to the tastes of the rich and famous, a market known to be more resilient to economic shifts, said CJS Securities Inc analyst Arnold Ursaner.
“When you are dealing with any global luxury brand, the value is in the eye of the beholder. To me it’s no different than a work of art, it’s what someone is willing to pay for that unique asset. The piano business of Steinway has a great pedigree and is not easy to come by,†Ursaner said.
A leveraged buyout of Steinway represents an unusual private equity-style deal for hedge fund mogul John Paulson, who shot to fame in 2007 with a prescient bet against subprime mortgages and repeated his success in 2009 with a bet on gold.
“We will proudly support the company’s legacy as the premier global piano manufacturer, a reputation earned with an uncompromising commitment to quality appreciated by almost all of the world’s most demanding pianists,†Paulson said in a statement.
He added he does not plan to close, relocate or change any of the company’s manufacturing operations.
Steinway said Paulson & Co. raised its offer to $40 a share from $38 following a $39 bid by South Korea’s Samick Musical Instruments Co. Ltd.
Steinway said on Tuesday that private equity firm Kohlberg & Co, which agreed to a deal with Steinway in July for $35 per share, had waived its right to match or beat Paulson’s offer, which represents a premium of 31.4 per cent to Steinway’s share price prior to the Kohlberg offer.
Steinway said the deal with Paulson did not provide for a “go-shop†period during which the company could actively seek out competing bids. But Steinway is allowed to accept a superior offer until the closing of Paulson’s tender offer, within 25 days.
Steinway would have to pay a termination fee of about $13.4-million to Paulson if it accepted another offer. It will pay Kohlberg $6.7-million to terminate their agreement.
Steinway, whose pianos have been used by legendary artists such as Cole Porter and Sergei Rachmaninoff and by contemporary ones like Chinese concert pianist Lang Lang, is nearly one-third owned by Samick, according to Thomson Reuters data.
Founded in 1958, Samick already manufactures pianos in the United States and has a production capacity of more than a half million guitars per year through factories in South Korea, Indonesia, China and the United States, according to its website.
Steinway’s brands also include Bach Stradivarius trumpets, Selmer Paris saxophones, C.G. Conn French horns, Leblanc clarinets, King trombones and Ludwig drums.
Waltham, Massachusetts-based Steinway’s sales have been stagnating and it has struggled to keep production margins competitive. Sales rose just 2 per cent in 2012.
The company said in December it had decided not to sell itself after a 17-month-long review of strategic options.
Kohlberg made its offer six months later, valuing the company at about $438-million.
Steinway completed the sale of its leasehold interest in the Steinway Hall building on Manhattan’s 57th Street in June to a partnership led by JDS Development Group for $46.3-million.
Paulson is paying between 10 and 10.5 times Steinway’s current earnings before interest, tax, depreciation and amortization, Ursaner said.
Steinway said it expects the deal to close in late September.
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It is my understanding that the "other" parts of the Steinway corporation are actually larger than piano division. Many people don't know that.
Originally Posted by Minnesota Marty
The Year to Date revenue for SMI is as follows: Piano Operations - $102.2 million Band Operations - $ 67.0 million
Well, Marty, to be fair to Jurgen if we are talking about manufactured products we could knock of about $20 million from piano operations for Boston and Essex. About half of piano revenues come from the Americas. That puts Astoria pianos around $40 million, about 60% of band operations.
Lies, damned lies, and statistics.
Ian Russell Schiedmayer & Soehne, 1925 Model 14, 140cm Ibach, 1905 F-IV, 235cm
However, we are discussing the total sale of SMI. Why did you exclude Hamburg? Remember that Boston and Essex are sold in Europe and are a major source of income for "the piano division." Though Steve Cohen would argue, they are still a product of Steinway.
In a PM, Jurgen posed an interesting question about O.S. Kelly Foundry and Kluge Keyboards. It's anyone's guess where they fit in, but I would guess "piano" rather than "band." But, stranger things have happened in the corporate world.
(To offset the rebuttal, isn't an iPod a product of Apple?)
Marty in Minnesota
It's much easier to bash a Steinway than it is to play one.
Remember that Boston and Essex are sold in Europe and are a major source of income for "the piano division." Though Steve Cohen would argue, they are still a product of Steinway.
(To offset the rebuttal, isn't an iPod a product of Apple?)
To be clear... while Steinway has designed some elements, and markets Boston and Essex, it is my position that that Boston and Essex are not "made by Steinway" nor should schools that buy Boston and/or Essex pianos claim to be "All Steinway Schools".
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Remember that Boston and Essex are sold in Europe and are a major source of income for "the piano division." Though Steve Cohen would argue, they are still a product of Steinway.
(To offset the rebuttal, isn't an iPod a product of Apple?)
To be clear... while Steinway has designed some elements, and markets Boston and Essex, it is my position that that Boston and Essex are not "made by Steinway" nor should schools that buy Boston and/or Essex pianos claim to be "All Steinway Schools".
iPhone/iPad/iPod are product of Foxconn... lol j/k
Remember that Boston and Essex are sold in Europe and are a major source of income for "the piano division." Though Steve Cohen would argue, they are still a product of Steinway.
(To offset the rebuttal, isn't an iPod a product of Apple?)
To be clear... while Steinway has designed some elements, and markets Boston and Essex, it is my position that that Boston and Essex are not "made by Steinway" nor should schools that buy Boston and/or Essex pianos claim to be "All Steinway Schools".
Steve,
I think you have been a little less forthcoming in this Saga than I think you should have, but with this statement I agree fully!
Like it or not, the Boston and Essex lines are part of SMI and part of the sale. I'm curious where the "made by Steinway" quote came from. It sure wasn't from S&S or SMI.
Yes Steve, we are well aware of your position on "All Steinway School" usage.
Marty in Minnesota
It's much easier to bash a Steinway than it is to play one.
However, we are discussing the total sale of SMI. Why did you exclude Hamburg?
Marty
In rough round figures, my breakdown of your YTD sales revenues of $100m for the piano operations are $20m Boston & Essex (global), $40m NY Steinway (Americas), $40m Hamburg Steinway (Europe/Asia). You are right that $80m from Steinway pianos exceed $67m revenues from band instruments, but I was looking at the made in USA element. However the costs of sale of all Steinway pianos and band instrumenrs, representing the value of production, appear roughly comparable around $50m.
Jurgen
I guess Kohlberg saw some potential in the instrument brands and I imagine Mr Paulson will be keen explore that too, not least because he can play some of them.
Last edited by Withindale; 08/15/1308:00 PM.
Ian Russell Schiedmayer & Soehne, 1925 Model 14, 140cm Ibach, 1905 F-IV, 235cm
My YTD revenues? I didn't do any breakdown of NY vs. Hamburg vs. Boston vs. Essex. The figures I listed are from the SMI 2nd. quarter report and listed YTD.
Originally Posted by Minnesota Marty
The Year to Date revenue for SMI is as follows:
Piano Operations - $102.2 million Band Operations - $ 67.0 million
Please remember that this is revenue, not profit.
Marty in Minnesota
It's much easier to bash a Steinway than it is to play one.
Kohlberg & Co. offered $35 per share for the company. In a subsequent 45-day “shopping period†Paulson was one of 64 buyers who evaluated the company’s financials
Quite a lot of interest in Steinway. I wonder if that's typical for a buyout offer though: lots of big investment managers coming by the lot and kicking the tires, in case a good deal shows up. Or maybe it's usually 100s of evaluators, and 64 is small.
To the employees, dealers and partners of Steinway & Sons: On behalf of Paulson & Co., I would like to introduce our firm and share our enthusiasm for our pending acquisition of Steinway Musical Instruments. We are excited to participate in the future of Steinway & Sons, re nowned for producing the finest quality pianos in the world. Paulson & Co. is an investment firm that manages approximately US$18 billion in assets and has offices in New York, London, and Hong Kong.
Our investment team has experience in a variety of industries, including several relevant to Steinway: media and entertainment, consumer products, and retailing. We have succe ssfully invested in both public and private companies that have executed global growth strategies center ed around remarkable brands. We are delighted to have the opportunity to invest in a business with the tradition for excellence that Steinway enjoys. We will proudly support the company’s legacy as the premier global piano manufacturer, a reputation earned with an uncompromising commitment to quality appreciated by the world’s most demanding pianists. Personally, I am the owner of three Steinway grand pianos ─ models M, O and B- and intend to add a fourth, a model B incorporating a factory-installed player piano system.
We intend to champion each of the attributes that make Steinway a unique company: its highly trained and skilled employees, perfected manufacturing processes, unwavering commitment to quality, revered global brand name, and dedication to partners, customers, artists and music lovers.
Paulson does not plan to close, relocate, or change any of the company’s manufacturing operations. We fully endorse management’s current strategy to grow in the company’s traditional markets as well as underpenetrated markets in Asia, Eastern Europe and South America.
We look forward to a bright future as together we build upon the great legacy of Steinway & Sons. Sincerely yours, John Paulson President Paulson & Co. Inc
If Apple design it (In California), market it and sub contract or license the manufacture, it's an Apple product. With just a weeny bit of Samsung DNA ;-)
If Steinway design it, market it, put it in their owned or franchised dealerships, put their Designed by Steinway brand on it, and subcontract manufacture of it to pianocosomewhere, then its a Steinway product. Therefore "all Steinway" schools with some Essex and Boston Steinway sub-brands are indeed all Steinway, whether some dealer / consultant likes it or not.
Looking at the revenue numbers I am a little surprised how small Steinway group is:not even the beginning of a pimple on the US economy. Small beer for the serious players but very important to the aficionados. My own guess remains, especially with hedge fund ownership and the trader mentality that entails, that Steinway will get broken up, with band side sold off, Hamburg separated, maybe with a Frankfurt listing if they can scrape up enough scale (no pun intended), and the US piano rump falling to the highest bidder.
If Apple design it (In California), market it and sub contract or license the manufacture, it's an Apple product. With just a weeny bit of Samsung DNA ;-)
If Steinway design it, market it, put it in their owned or franchised dealerships, put their Designed by Steinway brand on it, and subcontract manufacture of it to pianocosomewhere, then its a Steinway product. Therefore "all Steinway" schools with some Essex and Boston Steinway sub-brands are indeed all Steinway, whether some dealer / consultant likes it or not.
Looking at the revenue numbers I am a little surprised how small Steinway group is:not even the beginning of a pimple on the US economy. Small beer for the serious players but very important to the aficionados. My own guess remains, especially with hedge fund ownership and the trader mentality that entails, that Steinway will get broken up, with band side sold off, Hamburg separated, maybe with a Frankfurt listing if they can scrape up enough scale (no pun intended), and the US piano rump falling to the highest bidder.
Splitting Hamburg off would make no sense whatsoever and destroy a great deal of brand value.
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