Steinway Bought Out and Going Private

Posted by: Steve Cohen

Steinway Bought Out and Going Private - 07/01/13 10:49 AM

http://phx.corporate-ir.net/phoenix.zhtm...&highlight=

Posted by: Dave Horne

Re: Steinway Bought Out and Going Private! - 07/01/13 11:12 AM

I saw that tidbit here ...

http://www.forbes.com/sites/halahtouryal...l-in-438m-deal/
Posted by: Plowboy

Re: Steinway Bought Out and Going Private! - 07/01/13 11:19 AM

Wow. $35.00 per share would be a good return on my 200 shares, which were purchased for $22 per share. Maybe this will start a bidding war with Samick? The standstill agreement will not be in effect.

Since I'll never be able to own a Steinway, it was nice to be able to sat I owned Steinway.

So, who's Kohlberg?
Posted by: pianoloverus

Re: Steinway Bought Out and Going Private! - 07/01/13 11:33 AM

For those, like me, who don't understand much about financial matters, what does this mean besides Steinway will be owned privately? Is this good or bad for Steinway pianos and for the piano industry? What would be the typical reasons for this type of decision?
Posted by: BDB

Re: Steinway Bought Out and Going Private! - 07/01/13 11:36 AM

Steinway has been privately owned most of its history.
Posted by: Rank Piano Amateur

Re: Steinway Bought Out and Going Private! - 07/01/13 11:38 AM

There are a bunch of press releases and stuff like that on the Internet now if you find one of the many news stories. The press releases make it sound as if the buyer wants to keep the company going and even to improve it in terms of sales, etc., which I hope is the case. Wikipedia has an entry on the buyer (Kohlberg) which makes it sound as though this is a possible outcome.

On the other hand, many purchases like this are made by companies that want to cash out a company that has a lot of liquid assets. I have to confess to a bit of worry about this outcome, especially since Steinway just sold Steinway Hall, so has a lot of cash around.

But, on the other hand, Steinway Hall did not bring close to what Kohlberg is paying, and the Steinway Board has apparently recommended that all shareholders tender their shares. So it could be hopeful!

Bob Snyder, what do you think?
Posted by: Withindale

Re: Steinway Bought Out and Going Private! - 07/01/13 11:39 AM

Originally Posted By: pianoloverus
What would be the typical reasons for this type of decision?

See About Kohlberg.
Posted by: Steve Cohen

Re: Steinway Bought Out and Going Private! - 07/01/13 12:00 PM

Originally Posted By: Rank Piano Amateur
There are a bunch of press releases and stuff like that on the Internet now if you find one of the many news stories. The press releases make it sound as if the buyer wants to keep the company going and even to improve it in terms of sales, etc., which I hope is the case. Wikipedia has an entry on the buyer (Kohlberg) which makes it sound as though this is a possible outcome.

On the other hand, many purchases like this are made by companies that want to cash out a company that has a lot of liquid assets. I have to confess to a bit of worry about this outcome, especially since Steinway just sold Steinway Hall, so has a lot of cash around.

But, on the other hand, Steinway Hall did not bring close to what Kohlberg is paying, and the Steinway Board has apparently recommended that all shareholders tender their shares. So it could be hopeful!

Bob Snyder, what do you think?

I'm not Bob but I would be VERY surprised if this were geared to dismantle Steinway. It is simply too valuable an asset.

There could be debt structure problems like the Bain Capital-Guitar Center situation. And there could be increasing pressure to move the NY factory to a less valuable location. And I agree that it could get VERY interesting if other bidders step up.

(My stock in Steinway had a nice increase today.)

Posted by: Rank Piano Amateur

Re: Steinway Bought Out and Going Private! - 07/01/13 12:09 PM

Thanks, Steve, I had not thought of the move-to-less-expensive-real-estate risk. Depending on where it is, Steinway may not be New York Steinway any more. If manufacturing moves to a different country (China, to pick a wild example), they won't even be American any more.

I hope that they stay in NY. They have built a lot of their mystique over the years on being New York Steinway and using only American parts; it would be sad to lose that.

Will this affect the relationship between the NY and Hamburg arms of the company?
Posted by: Withindale

Re: Steinway Bought Out and Going Private! - 07/01/13 12:22 PM

Originally Posted By: Withindale
Originally Posted By: pianoloverus
What would be the typical reasons for this type of decision?

See About Kohlberg.

Kohlberg say, "Kohlberg invests in companies where it can work in partnership with senior management to identify growth opportunities and implement fundamental operating and strategic changes, resulting in substantial increases in revenue and cash flow. Kohlberg’s use of moderate amounts of debt financing in acquiring companies affords the financial flexibility necessary to attain these corporate objectives."

No doubt Kohlberg have spotted opportunities for growth and will welcome any suggestions in this thread that help to achieve their aims.

No need for wild speculation, though.
Posted by: Plowboy

Re: Steinway Bought Out and Going Private! - 07/01/13 12:27 PM

The stock is now $35.09 a share. Weird.
Posted by: Minnesota Marty

Re: Steinway Bought Out and Going Private! - 07/01/13 12:29 PM

My thoughts about moving: The value of the Astoria property is very high and could command big bucks. A sale could infuse yet more capital. My guess is that Steinway might relocate to some area within New York State, to hold onto the tradition of 150 years. I doubt that it would relocate its manufacturing 'off shore.'

Hamburg and NY are the same company, all under the umbrella of LVB holdings. On paper they are the same corporation with independent management. Just as are the various other divisions manufacturing a full assortment of musical instruments, recordings, and sound equipment. I read it to mean that it has all been sold lock, stock and barrel.

But, then again, that only my opinion as I understand the sale as of today.

(Yea, I'm grinnin' too. Capital gains are going to be a bite, however.)
Posted by: BDB

Re: Steinway Bought Out and Going Private! - 07/01/13 12:30 PM

Originally Posted By: Plowboy
The stock is now $35.09 a share. Weird.


That happens when a buy-out is announced.
Posted by: Plowboy

Re: Steinway Bought Out and Going Private! - 07/01/13 12:32 PM

Originally Posted By: Rank Piano Amateur

Will this affect the relationship between the NY and Hamburg arms of the company?


It's the same company. Whoever buys Steinway Instruments will get both piano factories as well and the band instrument manufacturers.
Posted by: Rich Galassini

Re: Steinway Bought Out and Going Private! - 07/01/13 12:34 PM

I read about this early this morning - probably from the same press release that Steve saw.

This could get quite interesting. Steinway owns plenty of assets that could be sold while still making pianos.

I have my ideas of likely fallout, but from what I could find of Kohlberg's history - closing Steinway's doors are unlikely. Changing the way they do business seems quite likely.

My 2 cents,
Posted by: Plowboy

Re: Steinway Bought Out and Going Private! - 07/01/13 12:38 PM

This doesn't sound good.

Quote:
Implementation of Operational Improvement Plan

Upon completion of the investment, the first phase of a new strategic plan is implemented. Typically, this phase focuses on excess cost reduction, implementing of best practices techniques to increase centralization of processes and improve efficiency. In Kohlberg’s Industrial Manufacturing and Consumer investments, this cost reduction phase is regularly accompanied by substantial cash flow improvements from working capital reduction. Additional liquidity is also regularly achieved in this phase through divesting non-core assets, which can be a driver of attractive deleveraging, business simplification and further cost improvement.

Targeted Growth and Business Repositioning

The last phase of Kohlberg’s ownership is a renewed focus on sales growth. In each new investment, a growth plan is implemented, frequently calling for savings generated through cost reduction to be reinvested back into the businesses in the form of product development, new market expansion or capacity improvement. In addition, in over half of its investments, Kohlberg will pursue and complete add-on acquisitions that afford an opportunity to complement existing products and distribution, while also creating impetus for further synergy and cost reduction.
Posted by: Steve Cohen

Re: Steinway Bought Out and Going Private! - 07/01/13 12:44 PM

Originally Posted By: Minnesota Marty
My thoughts about moving: The value of the Astoria property is very high and could command big bucks. A sale could infuse yet more capital. My guess is that Steinway might relocate to some area within New York State, to hold onto the tradition of 150 years. I doubt that it would relocate its manufacturing 'off shore.'

Hamburg and NY are the same company, all under the umbrella of LVB holdings. On paper they are the same corporation with independent management. Just as are the various other divisions manufacturing a full assortment of musical instruments, recordings, and sound equipment. I read it to mean that it has all been sold lock, stock and barrel.

But, then again, that only my opinion as I understand the sale as of today.

(Yea, I'm grinnin' too. Capital gains are going to be a bite, however.)


Keep in mind also that Samick bought a huge parcel in Gallatin, TN only a small percentage of which is developed. The chairman of Samick owns such a large portion of Steinway stock that he had to be involved in the decision to go private.
Posted by: Minnesota Marty

Re: Steinway Bought Out and Going Private! - 07/01/13 12:55 PM

True, Steve. I hadn't considered that connection. There is something odd about saying Tennessee Steinway, y'all.

(WOW - New marketing angle: "Steinway - The Thoroughbred of Pianos")
Posted by: Jean Claude

Re: Steinway Bought Out and Going Private! - 07/01/13 01:29 PM



Perhaps they will make a 'Crown Jewels' Nashville edition, finished in buckskin with 'Steinway and Boys' picked out tastefully in rhinestones on the lid.
Posted by: pianocritic

Re: Steinway Bought Out and Going Private! - 07/01/13 01:29 PM

Another possibility would be Samick divesting itself from Steinway and building pianos under their own name versus the pianos they build for Steinway. Samick has the plant and where with all to build an instrument of what ever quality they want in their new state of the art factory. They also have the financial resources to do what ever they want and are not dependent on Steinways portion of their business. On the opposite side Steinway in very dependent on Samick for their share of their business. Just a thought.
Posted by: Plowboy

Re: Steinway Bought Out and Going Private! - 07/01/13 02:16 PM

Originally Posted By: pianocritic
Another possibility would be Samick divesting itself from Steinway and building pianos under their own name versus the pianos they build for Steinway.


I do not believe that Samick builds any pianos for Steinway.

Having Samick take over Steinway is, I think, a better idea than having some Wall Street firm take over.
Posted by: Steve Cohen

Re: Steinway Bought Out and Going Private! - 07/01/13 02:23 PM

Originally Posted By: pianocritic
Another possibility would be Samick divesting itself from Steinway and building pianos under their own name versus the pianos they build for Steinway. Samick has the plant and where with all to build an instrument of what ever quality they want in their new state of the art factory. They also have the financial resources to do what ever they want and are not dependent on Steinways portion of their business. On the opposite side Steinway in very dependent on Samick for their share of their business. Just a thought.


Not only doesn't Samick build for Steinway (yet!!!) but Samick hasn't built a new plant since the 1990s when they built just outside of Jakarta. (I've been there and, while they turn out a good value instrument, it is far from state of the art.

Where did you come up with this stuff?
Posted by: phacke

Re: Steinway Bought Out and Going Private! - 07/01/13 02:30 PM

Congrats to all the LVB owners. A buyout like this, a company in the black, is the ultimate confirmation of its value. Bummer that we won't have the transparency of a public company henceforth. I was hoping to get in at some point in the oscillations in price, but no such luck.
Posted by: pianocritic

Re: Steinway Bought Out and Going Private! - 07/01/13 03:29 PM

Sorry- Brain Fog - Meant Kawai - Not Samick
Posted by: Jeff Clef

Re: Steinway Bought Out and Going Private! - 07/01/13 03:29 PM

"...There is something odd about saying Tennessee Steinway, y'all. (WOW - New marketing angle: "Steinway - The Thoroughbred of Pianos")..."

I believe you are thinking of Kentucky, Marty--- if you're thinking of fine horseflesh.

The name that comes to mind for me, is Karen Hendricks. But let us hope that Steinway fares better under its new management than Baldwin did.
Posted by: PianoStudent88

Re: Steinway Bought Out and Going Private! - 07/01/13 03:38 PM

The wording is all very genteel, but the link about Kohlbetg says "corporate raider" to me. Shake things up to extract the most cash, and then turf the company out to try to run as a going concern again, if it survives the operational shakeup and the cash extraction.
Posted by: Steve Cohen

Re: Steinway Bought Out and Going Private! - 07/01/13 04:00 PM

Might this parallel the Bain Capital/Guitar Center scenario?

In that case, Guitar Center, who had been taken private by Bain, was loaded up with so much debt that, while it is a reasonably profitable company it is unable to meet its debt obligations.
Posted by: Almaviva

Re: Steinway Bought Out and Going Private - 07/01/13 04:04 PM

This may not be as bad as it initially seems. Kohlberg & Co. was founded by Jerome Kohlberg, one of the founders of Kohlberg Kravis Roberts, the giant leveraged-buyout equity firm. Mr. Kohlberg sold out of KKR in the late 1980s because he disagreed with KKR policies of heavily-leveraged buyouts of huge companies, and started Kohlberg & Co.

Worst case scenario - Kohlberg sells the Astoria and Hamburg factories, moves manufacturing to China, and turns Steinway into another Baldwin.

Best case scenario - Kohlberg shakes up the company without moving manufacturing out of the U.S. & Germany, restores it to profitability, and improves the quality of Steinway pianos.
Posted by: rysowers

Re: Steinway Bought Out and Going Private - 07/02/13 01:52 AM

I find this news a little worrying. A piano company is not like a toaster company. It takes an amazing amount of finesse and care to produce a quality piano. People who don't know a lot about pianos can drastically underestimate how important all the little nit-picky details are when it comes to touch and tone. Kohlberg & Co seem oriented towards cutting costs, which sounds dangerous for a company like Steinway.

I view a piano factory as a really large piano with lots of intricate parts that have to be well-regulated to produce the desired result. There are so many places to go wrong!

Anyways, I'll keep my fingers crossed that this will be a positive chapter in the companies history.
Posted by: Allan W.

Re: Steinway Bought Out and Going Private - 07/02/13 02:09 AM

I've heard someone say this: "The company that bought Steinway follows the same business practices of Mitt Romney. They'll pillage the company for everything they can and then dump it."

How true do you think this is? Congrats to all you stock holders out there though. They are buying shares back at $35, which is around 16% higher than the stock price yesterday.
Posted by: Del

Re: Steinway Bought Out and Going Private - 07/02/13 02:15 AM

I have no idea whether this will be good for Steinway pianos or not. But it's now about more than just a piano. It is brand marketing on an international scale. Witness the China-specific BMW/Steinway Series 7 "Composition."

Quote:
From http://www.bmwcoop.com/2010/11/17/video-...-steinway-sons/
Composition together with Steinway & Sons BMW give birth to a special edition of 7 Series, an edition which brings a stylish feel for the Bavarian model. The Germans at BMW decided to join the forces with the Steinway & Sons, a renowned music instruments manufacturer. The special edition developed by BMW and Steinway & Sons is called Composition and is dedicated to the 7 Series range.


I understand the production run quickly sold out. I’ve seen two of them in the financial district of Tianjin.

There are several other “Steinway” branded products around as well.

ddf
Posted by: CC2 and Chopin lover

Re: Steinway Bought Out and Going Private - 07/02/13 08:32 AM

Quote:
I've heard someone say this: "The company that bought Steinway follows the same business practices of Mitt Romney. They'll pillage the company for everything they can and then dump it."


You've heard someone say this? Tell them they don't know what the heck they are talking about. If you took the time to research exactly what took place at Bain during the time Mitt Romney was in charge, you would see MANY more examples of faltering companies that were made viable again by Bain's intervention. Since inception it has invested in or acquired hundreds of companies including AMC Entertainment, Aspen Education Group, Brookstone, Burger King, Burlington Coat Factory, Clear Channel Communications, Domino's Pizza, DoubleClick, Dunkin' Donuts, D&M Holdings, Hospital Corporation of America (HCA), Sealy, The Sports Authority, Staples, Toys "R" Us, Warner Music Group and The Weather Channel. Your "friends" premise is simply ignorant liberal propaganda
Posted by: Steve Cohen

Re: Steinway Bought Out and Going Private - 07/02/13 09:25 AM

Here's a new document filed by Steinway today:

http://phx.corporate-ir.net/phoenix.zhtml?c=76306&p=irol-sec

It specifically sets up the possibility for Samick's Chairman Kim to be a suitor.
Posted by: Minnesota Marty

Re: Steinway Bought Out and Going Private! - 07/02/13 09:49 AM

Originally Posted By: Jeff Clef
"...There is something odd about saying Tennessee Steinway, y'all. (WOW - New marketing angle: "Steinway - The Thoroughbred of Pianos")..."

I believe you are thinking of Kentucky, Marty--- if you're thinking of fine horseflesh.

I was thinking of a Tennessee Trotter which I guess is not a thoroughbred.

Cheers - Steinway-The Jack Daniels of Pianos! (I'll sip to that)
Posted by: Jonathan Baker

Re: Steinway Bought Out and Going Private - 07/02/13 10:04 AM

The question is: why would Kohlberg really want to buy Steinway? It is not a start-up dot-com with the potential to make its owners tens of billion$. As I see it without insider knowledge, only two possibilities present themselves:

1) the new owners can afford to be self-indulgent by purchasing a high prestige cultural item, either to burnish their portfolio, and/or there is a cultural affectionato at Kohlberg who wants Steinway for itself.

Or, and more likely in my view:

2) the new owners want to exploit the prestige of the Steinway name by expanding the trade name to include far more than it currently does, making more and cheaper instruments with the Steinway name pulling in new customers, as well as expanding the product line (Steinway headphones, Steinway plasma TVs, Steinway bicycles, you name it).
Posted by: Plowboy

Re: Steinway Bought Out and Going Private! - 07/02/13 10:55 AM

The sharks, smelling blood in the water, are starting to circle the deal.

http://www.marketwatch.com/investing/stock/LVB/news

Quote:


SHAREHOLDER ALERT: Levi & Korsinsky Announces Investigation into Possible Breaches of Fiduciary Duty by the Board of Steinway Musical Instruments, Inc. in Connection with the Sale of the Company to Kohlberg & Company

7:13 a.m. Today

- BusinessWire

Harwood Feffer LLP Announces Investigation of Steinway Musical Instruments Inc.

9:25 p.m. July 1, 2013

- PR Newswire

Faruqi & Faruqi, LLP, Partner Juan E. Monteverde Launches an Investigation of Steinway Musical Instruments Inc. Over the Proposed Sale of the Company to Kohlberg & Company

7:00 p.m. July 1, 2013

- BusinessWire

Morgan & Morgan Announces the Investigation of Steinway Musical Instruments, Inc. Buyout LVB

5:28 p.m. July 1, 2013

- PR Newswire

Finkelstein Thompson LLP Announces Investigation of Steinway Musical Instruments, Inc.

5:01 p.m. July 1, 2013

- BusinessWire

Acquisition of Steinway Musical Instruments, Inc. by Kohlberg & Company May Not Be in the Best Interests of Steinway Shareholders

4:30 p.m. July 1, 2013

- PR Newswire

Steinway Musical Instruments, Inc. Shareholder Alert: Briscoe Law Firm and Powers Taylor, LLP Investigate Sale of Steinway Musical Instruments to Kohlberg & Company

4:15 p.m. July 1, 2013

- BusinessWire

SHAREHOLDER ALERT: Levi & Korsinsky Announces Investigation into Possible Breaches of Fiduciary Duty by the Board of Steinway Musical Instruments, Inc. in Connection with the Sale of the Company to Kohlberg & Company

3:12 p.m. July 1, 2013

- BusinessWire

Rigrodsky & Long, P.A. Announces Investigation Of Steinway Musical Instruments, Inc. Buyout

11:34 a.m. July 1, 2013

- BusinessWire
Posted by: Nash. Piano Rescue

Re: Steinway Bought Out and Going Private - 07/02/13 11:03 AM

Gotta love all the speculation about Samick building another plant in Gallatin . Especially since people that work there are always telling me they are looking to move out of the area. Dolly Parton was going to build another huge theme park out by the Opry and her plans were dashed when she got the land use tax bill. I loved it when she told state officials to go pound sand on national TV... so much for the estimated 500 jobs, plus thousands of support jobs.

Just because you own land in the state of TN does not mean you can develop it and they will make you pay dearly in taxes. I'm still trying to figure out why I pay 50 bucks extra a year for the brand new Nashville speedway which is already out of business, 25 mil to build.
Posted by: ClsscLib

Re: Steinway Bought Out and Going Private! - 07/02/13 11:10 AM

Originally Posted By: Plowboy
The sharks, smelling blood in the water, are starting to circle the deal.

http://www.marketwatch.com/investing/stock/LVB/news

Quote:


SHAREHOLDER ALERT: Levi & Korsinsky Announces Investigation into Possible Breaches of Fiduciary Duty by the Board of Steinway Musical Instruments, Inc. in Connection with the Sale of the Company to Kohlberg & Company

7:13 a.m. Today

- BusinessWire

Harwood Feffer LLP Announces Investigation of Steinway Musical Instruments Inc.

9:25 p.m. July 1, 2013

- PR Newswire

Faruqi & Faruqi, LLP, Partner Juan E. Monteverde Launches an Investigation of Steinway Musical Instruments Inc. Over the Proposed Sale of the Company to Kohlberg & Company

7:00 p.m. July 1, 2013

- BusinessWire

Morgan & Morgan Announces the Investigation of Steinway Musical Instruments, Inc. Buyout LVB

5:28 p.m. July 1, 2013

- PR Newswire

Finkelstein Thompson LLP Announces Investigation of Steinway Musical Instruments, Inc.

5:01 p.m. July 1, 2013

- BusinessWire

Acquisition of Steinway Musical Instruments, Inc. by Kohlberg & Company May Not Be in the Best Interests of Steinway Shareholders

4:30 p.m. July 1, 2013

- PR Newswire

Steinway Musical Instruments, Inc. Shareholder Alert: Briscoe Law Firm and Powers Taylor, LLP Investigate Sale of Steinway Musical Instruments to Kohlberg & Company

4:15 p.m. July 1, 2013

- BusinessWire

SHAREHOLDER ALERT: Levi & Korsinsky Announces Investigation into Possible Breaches of Fiduciary Duty by the Board of Steinway Musical Instruments, Inc. in Connection with the Sale of the Company to Kohlberg & Company

3:12 p.m. July 1, 2013

- BusinessWire

Rigrodsky & Long, P.A. Announces Investigation Of Steinway Musical Instruments, Inc. Buyout

11:34 a.m. July 1, 2013

- BusinessWire


This happens with every major corporate finance announcement.

There's a genus of bottom-feeding class action plaintiff lawyers who file suit at the drop of a hat on every corporate development, regardless of whether there's any evidence of wrongdoing, in the hope of extorting a "nuisance" settlement that the real risk-takers might view as worth the cost to clear the path for the merger, acquisition, or what have you.

In these settlements, the lawyers usually get cash for 35-40% of the putative "value" of the settlement, and the individuals who opt into the plaintiff "class" usually get coupons for 5% off of their next purchase from the evil corporate wrongdoers who allegedly screwed them in the first place.

It's quite a system.
Posted by: Plowboy

Re: Steinway Bought Out and Going Private! - 07/02/13 11:38 AM

I don't like the deal and would prefer to keep my shares. I purchased after doing some research and think Steinway looks pretty good for the future. Their sales in the Americas have recovered, and overseas sales are increasing thanks to China. My 0.0000000001% share in the company is probably not enough to squash the buyout, however. :-) My equity consists of a pile of spruce shavings on the shop floor, maybe they'll let me keep those.
Posted by: Steinway Piano DC

Re: Steinway Bought Out and Going Private! - 07/02/13 11:54 AM

I can assure everyone that this is a very good day for Steinway & Sons and their customers. Steinway's constituency will be very happy with the results.

David Slan, President
Steinway Piano Gallery - Washington, DC/St. Louis
Posted by: Plowboy

Re: Steinway Bought Out and Going Private - 07/02/13 12:08 PM

David, I hope you are correct. However my past experience with private equity investment groups leaves me feeling rather pessimistic.

From the Pianist Corner:
Quote:
They'll pull out of New York to harvest the capital in the real estate and move production to Mississippi, or more likely China, and Baldwinize the company. They'll extract everything of value possible. The Steinway name will become a luxury brand, think watches, luxury automobile editions, etc. They'll sell as much as possible in China, until the Chinese consumers figure out they're getting fraudulent goods.

They'll pay themselves million dollar salaries and bonuses, eventually declaring bankruptcy after they finish raping and pillaging the company.

Or maybe we'll get lucky and Samick will up the offer and buy them. Essex and Boston will move to Indonesia and the New York and Hamburg factories will remain operating, much like Seiler.

Posted by: Minnesota Marty

Re: Steinway Bought Out and Going Private - 07/02/13 12:11 PM

The quote from pianist corner is nothing but conjecture. It is similar to many postings in this thread. Conjecture is not fact. My opinion on the matter is that it is just too soon to forecast the outcome of the sale.
Posted by: Plowboy

Re: Steinway Bought Out and Going Private - 07/02/13 12:24 PM

I hope you are correct, Marty.
Posted by: Minnesota Marty

Re: Steinway Bought Out and Going Private - 07/02/13 01:21 PM

It would be interesting to hear from someone at Steinway Corporate rather than from a franchised dealer.
_________________________________________________

Something strange is going on. - My above comment was a response to BoseEric and that posting has disappeared.
Posted by: TomazP

Re: Steinway Bought Out and Going Private - 07/02/13 01:25 PM

This....Just....SUCKS!
Posted by: Steinway Piano DC

Re: Steinway Bought Out and Going Private - 07/02/13 01:54 PM

The Pianist Corner quote is just silly. Steinway already sold their Manhattan building, and the factory property is located in an industrial area of Queens. So it's not about real estate. Unlike other piano companies, Steinway has maintained their reputation by branding their less expensive products with different names (Boston and Essex). This has worked exceptionally well for Steinway. So the idea of changing that marketing plan makes no sense whatsoever. The value of the Steinway company is not as a break-up. There isn't anything there to break up. Steinway is doing very well financially, and both factories are building the best quality pianos they have ever produced. The value of the Steinway company has always been, and will always be, as a long term investment for its intrinsic brand equity and financial performance.
Posted by: Steve Chandler

Re: Steinway Bought Out and Going Private - 07/02/13 03:49 PM

Originally Posted By: Steinway Piano DC
The value of the Steinway company is not as a break-up. There isn't anything there to break up. Steinway is doing very well financially, and both factories are building the best quality pianos they have ever produced. The value of the Steinway company has always been, and will always be, as a long term investment for its intrinsic brand equity and financial performance.

What you talk about is only the piano side of the business. Steinway Musical Instruments is the parent company to two divisions, piano maker Steinway & Sons and Conn-Selmer. The piano side also runs the Arkiv Music classical music recording label, a foundry and Lyngdorf home theater sound systems. Conn-Selmer is a collection of more than a dozen brands of instruments, including Bach Stradivarius trumpets, Selmer Paris saxophones, C.G. Conn French horns, and Leblanc clarinets. It would seem there's plenty to break up. How such a break up would impact the piano manufacturing side of the company remains to be seen.

The worrisome aspect is that the typical private equity firm is interested only in maximizing shareholder value and that usually means stripping out any cash, raiding any pension fund, loading all the divisions up on debt and selling them off. Is Kohlberg a typical private equity firm? We don't know and only time will tell. It's possible their intent is to improve operational efficiency or find some other way to enhance value for their shareholders. That is the bottom line their intent is to enhance value for shareholders and you can bet they have a plan to do that. Nobody spends $438 Million without a plan to realize better than market growth of their investment. The status quo is not an option.
Posted by: Steve Cohen

Re: Steinway Bought Out and Going Private - 07/02/13 04:04 PM

I was interviewed by NY classical radio station WQXR. You can read its blog article at:

http://www.wqxr.org/#!/blogs/wqxr-blog/2013/jul/02/explainer-what-steinway-sale-means-music-fans/
Posted by: Minnesota Marty

Re: Steinway Bought Out and Going Private - 07/02/13 04:36 PM

Thanks, Steve. That was an interesting and balanced report. As I said earlier, time will tell.

From the link you provided, I was able to find this. All of the modern manufacturing clips are available, but this one goes back to an earlier era. It's fun to watch.

1929 S&S Manufacturing

Enjoy,
Posted by: Steve Cohen

Re: Steinway Bought Out and Going Private - 07/02/13 04:46 PM

Originally Posted By: Minnesota Marty
Thanks, Steve. That was an interesting and balanced report. As I said earlier, time will tell.

From the link you provided, I was able to find this. All of the modern manufacturing clips are available, but this one goes back to an earlier era. It's fun to watch.

1929 S&S Manufacturing

Enjoy,


You didn't know?????

I shot that video!!! laugh
Posted by: Minnesota Marty

Re: Steinway Bought Out and Going Private - 07/02/13 05:07 PM

Wow Steve. Now I know why you are about to enter the "Yikes" group!
Posted by: ando

Re: Steinway Bought Out and Going Private - 07/02/13 05:26 PM

Thanks for posting that video, Marty. It was fun to watch. Amazing how efficient and well tooled an operation it was in 1929.
Posted by: Norbert

Re: Steinway Bought Out and Going Private - 07/02/13 07:15 PM

Quote:
It specifically sets up the possibility for Samick's Chairman Kim to be a suitor.


So why has Dr. Kim of Samick not taken advantage of it?

Rumors from Europe indicate he won't [at least anytime soon..]

The full story obviously needs playing itself out yet.

Norbert
Posted by: phacke

Re: Steinway Bought Out and Going Private - 07/03/13 12:03 AM

In the news it says "Macquarie Group Ltd and General Electric Capital Corp. are providing financing to support Kohlberg & Co.’s $438 million acquisition of Steinway Musical Instruments Inc. "

Just after LVB paid off most of their debt with the sale of Steinway Hall, it looks like the new owning entity is taking on debt for the purchase. It is not clear to me how much debt, but this is extra expense (principal + interest) for the new Steinway entity with no clarified benefit. So far, the purpose of the debt is just so the new owners can have it.

I thought this case study of a kohlberg takeover was interesting.

http://www.kohlberg.com/investmentapproach/casestudydetail.aspx?id=1

Compelling Situation:
-Kohlberg acquired Bauer in 2008 from its parent Nike

Results:
-Bauer has undergone a dynamic resurgence since 2007

(ergo, buy companies on the upswing?)

-Listed on the Toronto Stock Exchange through a Canadian IPO in March of 2011

(ergo, you may get the opportunity to buy us back in the future)

Posted by: Piano World

Re: Steinway Bought Out and Going Private - 07/03/13 12:40 AM

It will be interesting to see whether the new owners are interested in growing the company, or stripping out all the profit they can make before tossing it aside.

I've watched this happen before. I hope it's the former rather than the latter.
I would truly hate to see a venerable old piano company reduced to a shell of its former self just to make some investors richer.
Posted by: GGO

Re: Steinway Bought Out and Going Private - 07/03/13 12:42 AM

Is this a bad timing to buy a new factory ordered Steinway?
Posted by: Minnesota Marty

Re: Steinway Bought Out and Going Private - 07/03/13 12:49 AM

Originally Posted By: GGO
Is this a bad timing to buy a new factory ordered Steinway?

Not at all!
Posted by: Minnesota Marty

Re: Steinway Bought Out and Going Private - 07/03/13 12:58 AM

"Market Place" on NPR had an interesting viewpoint on the sale. They seemed to indicate that the investment group is looking for "Luxury" manufacturers and want to polish the image and not destroy the company. They are going after high tag portfolio investors who get in their private jet to go pick out a Steinway. They also indicated the growing market in China is a target and that there is the cash available for individuals to buy an 'imported' piano. It really didn't seem like S&S would start building in China. Essex already caters to a specific market very well.
Posted by: GGO

Re: Steinway Bought Out and Going Private - 07/03/13 01:23 AM

Originally Posted By: Minnesota Marty
Originally Posted By: GGO
Is this a bad timing to buy a new factory ordered Steinway?

Not at all!

Thanks Marty. Any insight into this?
My concern is that Steinway staff members would be worried / distracted and some re-structuring may be taking place...
Posted by: master88er

Re: Steinway Bought Out and Going Private - 07/03/13 01:28 AM

Originally Posted By: Minnesota Marty
Originally Posted By: GGO
Is this a bad timing to buy a new factory ordered Steinway?

Not at all!


On what do you base that assertion?
Posted by: laguna_greg

Re: Steinway Bought Out and Going Private - 07/03/13 01:42 AM

Hi Marty,

Originally Posted By: Minnesota Marty
"Market Place" on NPR had an interesting viewpoint on the sale. They seemed to indicate that the investment group is looking for "Luxury" manufacturers and want to polish the image and not destroy the company.


You are fooling yourself. That copy was written by a PR team.

Funny how that stated goal never works out. It reminds me of what happened when the Luis Vuitton holding company (I forget their name) bought Moet et Chandon, and a couple of Italian vineyards, and then set up a satellite in Napa under the "Moet et Chandon Estate" label. The quality was noticeably worse off within two vintages, and continues to drop. But they sure still want to get top prices for their wines, even if they aren't nearly as good anymore!

I really hope the new corporate management is reading this thread.

Because as a pianist, the proof of the pudding is in the eating. The American Steinway output has been uneven at best since they took the company back. If the pianos drop in quality in the subsequent production years after the sale goes through, I'm never going to buy a new one again. I'll tell everyone I know or work with not to buy a new Steinway. If they decide to change ANYTHING, IN ANY WAY with the plant in Hamburg or its output, I'll tell everyone I know or work with to buy a vintage Hamburg Steinway, but never a new one. Most likely, I'll be telling anybody who asks that the new Steinway they want to own is actually a Chinese piano. Most likely, it will be the truth, and the new piano will be a pale shadow of what Steinway once was.

As far as I'm concerned, this marks the end of Steinway as a maker of great pianos. I guess I'll go out into the yard, rub ash in my hair, and hire mourners to wail.

This is conceivably worse than when CBS took over. I'm quite shocked the rest of you don't see it regardless of what you read in the papers.

Marty, I hope your stock does well for you. That's about all that will happen to it.
Posted by: music32

Re: Steinway Bought Out and Going Private - 07/03/13 04:07 AM

I have to agree with Laguna-Greg.. .I think things are going downhill. In any case, no pun intended, I'm a vintage Steinway person, and not predisposed to installing NEW soundboards in them.. I played a bunch of those on Piano Row, and they did NOT sound like Steinways, period. The best piano of the lot in a particular store was an 1895 or so Bechstein with its orig. soundboard.. stood out among all.
Posted by: music32

Re: Steinway Bought Out and Going Private - 07/03/13 04:08 AM

I have video of my playing the Bechstein, and it proved my point.
Posted by: Bob

Re: Steinway Bought Out and Going Private - 07/03/13 06:24 AM

I would not worry about buying a new Steinway - after all, the factory has been though 4 day weeks, and occasional week long furloughs in response to the recession, and production has continued.

I would not assume this is a negative event for Steinway. I would let time tell. I think there is room for more quality improvements, and more production efficiency at the NY factory. I think some assembly methods that are done because "it's always been done that way" might be done a bit better, a bit faster, and with greater precision.

A Steinway piano arrives at the store only 95% complete. It would be better for cash strapped stores and the end consumer if stores didn't have to complete prep that was missed at the factory.

I love working on Steinways, because each piano has it's own characteristics, just as each of your children have different personalities. I hope that part of the Steinway piano never changes.
Posted by: Rich Galassini

Re: Steinway Bought Out and Going Private - 07/03/13 06:41 AM

Originally Posted By: Bob
I would not worry about buying a new Steinway - after all, the factory has been though 4 day weeks, and occasional week long furloughs in response to the recession, and production has continued.


This is true, Bob. When someone is trying to feed their family and they are working two weeks on and two weeks off, it is difficult. But between that and the layoffs they have had over the past few years, I don't know that there is much more water to be had at that well. At least not without drastically changing the process.

Originally Posted By: Bob

A Steinway piano arrives at the store only 95% complete. It would be better for cash strapped stores and the end consumer if stores didn't have to complete prep that was missed at the factory.


True enough. But this represents a cost for the factory that they would rather not have. It kind of goes the opposite direction from your first statement.

Originally Posted By: Bob
I love working on Steinways, because each piano has it's own characteristics, just as each of your children have different personalities. I hope that part of the Steinway piano never changes.


Although I am happy that you enjoy this aspect of the NY production, that inconsistency from piano to piano can be very frustrating to musicians. It is something that isn't a part of the Hamburg product - or very many other great pianos.

More consistency from the NY production would greatly help the product. I understand they are doing better on that front right now than at any other time in recent history. I applaud those efforts!
Posted by: ClsscLib

Re: Steinway Bought Out and Going Private - 07/03/13 07:14 AM

I hadn't realized that hyperventilation could be quite so contagious.
Posted by: R_B

Re: Steinway Bought Out and Going Private! - 07/03/13 07:17 AM

Originally Posted By: Plowboy
Wow. $35.00 per share would be a good return on my 200 shares, which were purchased for $22 per share. Maybe this will start a bidding war with Samick? The standstill agreement will not be in effect.

Since I'll never be able to own a Steinway, it was nice to be able to sat I owned Steinway.

So, who's Kohlberg?


I used to do that;
"The year I sold the Steinway" sort of statements, without clarifying that it was a few hundred shares of LVB.
Posted by: R_B

Re: Steinway Bought Out and Going Private - 07/03/13 08:52 AM

Originally Posted By: Bob
I would not worry about buying a new Steinway - after all, the factory has been though 4 day weeks, and occasional week long furloughs in response to the recession, and production has continued.

I would not assume this is a negative event for Steinway. I would let time tell. I think there is room for more quality improvements, and more production efficiency at the NY factory. I think some assembly methods that are done because "it's always been done that way" might be done a bit better, a bit faster, and with greater precision.

A Steinway piano arrives at the store only 95% complete. It would be better for cash strapped stores and the end consumer if stores didn't have to complete prep that was missed at the factory.

I love working on Steinways, because each piano has it's own characteristics, just as each of your children have different personalities. I hope that part of the Steinway piano never changes.


If the doom and gloomers are right there will be pre and post buy out NY Steinways, with some perceived value difference.

At some point Steinway may become just another emblem stuck on the same old same old - much as "Cadillac" is essentially a Chevrolet with slightly different trim.
Essex, Boston, Steinway,,, with optional colors, veneers, etc.

Mere OPINION, but PRODUCT consistency is usually an indicator of PROCESS maturity aka quality.
5% incomplete out the door doesn't hack it in any other manufacturing business - like it or not this IS a manufacturing business.
Posted by: Steve Cohen

Re: Steinway Bought Out and Going Private - 07/03/13 09:05 AM

All this doom and gloom conjecture is WAY premature. As has been pointed out many times, the piano industry is rather unique. This case is no exception.

Also, there are many factors in play that most posters here are completely unaware of.

[My 10,0000th post!]
Posted by: Numerian

Re: Steinway Bought Out and Going Private! - 07/03/13 09:17 AM

This is not Indrik Laul or Udo Steingraeber buying a venerable piano manufacturer because they love making quality pianos. This is a leveraged buyout firm with no particular familiarity with pianos or what it takes to build a fine instrument. They are not going to care about Steinway's history, except to the extent it feeds into the brand image. Kohlberg & Co. has an obligation only to its shareholders and investors, who are charged very high rates (2% annually on amounts invested, and usually 20% of all profits earned) because Kohlberg promises them very high returns even after these fees. Unfortunately, in the past six years the private equity and hedge fund businesses have not been able to produce the returns investors are used to, so they are under pressure to step up their own performance.

Kohlberg & Co. are one of the better performers in the business. They don't like to use excessive amounts of debt and they don't always look for quick answers such as moving all manufacturing to Asia. Still, their goal is to "clean up" the company by finding manufacturing efficiencies, and selling off non-strategic assets, however these are defined. And they definitely use debt, or Macquarie wouldn't be in the picture, so there is going to be pressure to clean up the company in five years or less and dispose of it at a profit, either by a resale to private investors or by an IPO on the market.

I would take their word for it that they see the Steinway brand as a link to the luxury market. That market has been one of the few that have performed consistently well since 2008 in most parts of the globe. Exactly how Steinway is going to create growth in the luxury sector for Kohlberg & Co. is the real challenge in this buyout, but obviously China is the place they will start. And that doesn't necessarily mean in pianos alone. The Chinese upper class may develop a taste for other instruments, and for band lessons for their children, as an example. It's easy to see in this buyout that the new Steinway will be marketed heavily in China, and perhaps some manufacturing moved there or elsewhere in Asia.

Whether management in the new Steinway cares whether the pianos compare to top names like Bosendorfer, Steingraeber, or Fazioli remains to be seen. Keeping up the highest quality standards in piano making just for the sake of being a top manufacturer is not likely to be a basic goal of the company. But keeping up some sort of reputation as a quality manufacturer of pianos is going to be important to maintaining the brand, which is all important in a buyout like this. If they can cut corners yet keep up the brand image for the next five years, then that is an acceptable approach. Remember, as nice as the people in Kohlberg are, their goal, and their obligation to their owners, is to get out of these buyout situations quickly. I've worked with enough of these buyout deals to know that the sooner you exit your position as owner, the higher your overall return will be. That is ultimately how they are judged - on the returns they generate their owners and investors.
Posted by: Minnesota Marty

Re: Steinway Bought Out and Going Private - 07/03/13 09:51 AM

Originally Posted By: laguna_greg
Hi Marty,

Originally Posted By: Minnesota Marty
"Market Place" on NPR had an interesting viewpoint on the sale. They seemed to indicate that the investment group is looking for "Luxury" manufacturers and want to polish the image and not destroy the company.


You are fooling yourself. That copy was written by a PR team.

Greg - How am I fooling myself? All I did was relay the opinion as expressed by a specific radio broadcast. I didn't say I agreed with it or that I even shared the opinion.

However, I doubt that the writers at "Market Place" are a PR team.
Posted by: Rank Piano Amateur

Re: Steinway Bought Out and Going Private! - 07/03/13 09:51 AM

I would add the Burgett brothers to Numerian's list of Indrik Laul and Udo Steingraeber. I do not see a similar aura around the Kohlberg transaction to that which surrounded the three purchasers listed. I agree that we should all wait and see (and hope), but it is perhaps worth noting that we have no choice in the matter.
Posted by: Norbert

Re: Steinway Bought Out and Going Private - 07/03/13 10:15 AM

Quote:
Kohlberg & Co. has an obligation only to its shareholders and investors, who are charged very high rates (2% annually on amounts invested, and usually 20% of all profits earned) because Kohlberg promises them very high returns even after these fees. Unfortunately, in the past six years the private equity and hedge fund businesses have not been able to produce the returns investors are used to, so they are under pressure to step up their own performance.



Could there be much larger investors lurking around the corner waiting to make their move - when time is right?

Norbert blush
Posted by: Hakki

Re: Steinway Bought Out and Going Private - 07/03/13 10:54 AM

I am with laguna_greg and Numerian on this.

In the past, I have visited the Estonia factory and personally met with Indrek Laul. Even though it was just a short visit, I could clearly understand why the brand was so successful after even briefly talking with Mr. Laul and seeing how the technicians were working with such a deep love for the instruments they were producing.

Yes, the piano business is different from other businesses. Steinway's success lies in their fine craftsmanship and tradition. If they move ANY, but ANY part of their production to China or elsewhere they are bound to lose.

I hope they keep the experienced craftsmen and the traditional way of producing each piano by hand. Nobody is after mass produced identical Steinways, even if they are far better than today's Steinways. The MAGIC lies in every one Steinway piano being different from each other and unique.

That is the main marketing value of the Steinway piano. Nobody would pay that much money for a machine made (even it is of a minor scale) piano. The buyer's main motive in spending such amount of money is the feeling that he/she is investing in a unique instrument and also an instrument that will hold its value better than mass produced pianos.
Posted by: GGO

Re: Steinway Bought Out and Going Private - 07/03/13 11:03 AM

My concern is that Steinway staff members would be worried / distracted and some re-structuring may be taking place...Is it a good or bad timing to get a factory order new NY Steinway?
Posted by: Minnesota Marty

Re: Steinway Bought Out and Going Private - 07/03/13 11:34 AM

GGO,

I understand your concern and there is no way to be absolutely certain of the shop morale. One thing that does seem to be certain, is for the foreseeable future, nothing is going to change. The types of restructuring changes being speculated about take years to accomplish, rather than months.

The Steinway artisans and craftsman are very proud of the job they do. That type of dedication does not disappear overnight. It's not like they can be replaced by temp workers and the Steinway crew is well aware of that fact.

If it were me, I would trust the reputation of the company and have no reservations about placing an order for one of their pianos.

You mentioned that you have placed an order. Is that because the model you preferred was not available at the showroom, or because you chose custom cabinetry or some other specific design change? A standard issue would already have been built. A custom order may, perhaps, be built with even more care.

So, it remains mere conjecture, and there is no absolute answer to your question. Within 43 days, if there is a general strike at the factories in NY and Hamburg, there would certainly be reason for concern. But, I think that is highly unlikely. Unless there is a major collapse, I trust that the builders will continue to do the job that they do so well.
Posted by: CC2 and Chopin lover

Re: Steinway Bought Out and Going Private - 07/03/13 11:45 AM

My memory may deceive me, but I do not recall ever reading a post that talks about someone having played a poorly prepped Hamburg Steinway. I have, however, read many, many posts concerning that complaint regarding the New York instruments. What does it say about a company that thinks it's OK to send out an instrument that someone is expected to pay 50, 60, 70 or $110K for in LESS than 110% "optimum" playing condition? Mind you, they are also not willing to discount a dime off that outrageous price, because, after all......"it's a Steinway"!! From my perspective, the best thing these new owners could do for that company is fire everyone in the New York office/factory and replace them with personnel from Hamburg.
Posted by: laguna_greg

Re: Steinway Bought Out and Going Private - 07/03/13 12:21 PM

Hi CC,

Joe88 has posted a few times about about having to perform on badly prepped Hamburgs.
Posted by: Plowboy

Re: Steinway Bought Out and Going Private - 07/03/13 12:35 PM

Originally Posted By: CC2 and Chopin lover
From my perspective, the best thing these new owners could do for that company is fire everyone in the New York office/factory...


Don't worry, that'll probably be one of their first moves. They'll slash wages and rob the pension while giving themselves nice fat bonuses and salary increases.
Posted by: ClsscLib

Re: Steinway Bought Out and Going Private - 07/03/13 12:37 PM

We're all pretty sure about what's going to happen, aren't we?
Posted by: Steve Cohen

Re: Steinway Bought Out and Going Private - 07/03/13 12:57 PM

Originally Posted By: ClsscLib
We're all pretty sure about what's going to happen, aren't we?


The assumptions many make here, without really knowing the facts, are astounding!
Posted by: laguna_greg

Re: Steinway Bought Out and Going Private - 07/03/13 12:57 PM

Hi Norbert,

" Unfortunately, in the past six years the private equity and hedge fund businesses have not been able to produce the returns investors are used to, so they are under pressure to step up their own performance."

"Could there be much larger investors lurking around the corner waiting to make their move - when time is right?"

Yes, absolutely. If a company is an object to be bought and sold like any other, then that's exactly what will happen, destroying the core values of the company by frequent changes in management and methods.

This has worked out well for high-end product-oriented businesses, like Louis Vuitton (think luggage and accessories), but not well for highly process-oriented business like wine (think Moet et Chandon and Ornelia). Mondavi PR started promoting "wine culture" and "wine philosophy" (there is no such thing) the minute they expanded into France and Italy and formed partnerships with Rothschild. They even started a wine museum on their campus in Napa, and put a lot of money into a non-profit center, Copia, for the same thing nearby. At the same time their quality of their core California product offering went down.

The Steinway firm has always promoted a "Steinway Mystique" as an added value to owning a Steinway. Such a pity that owning an expensive musical instrument doesn't make you a musician! Just like drinking wine doesn't make you a sage, or an art connoisseur. It will get your drunk though, and a piano won't even do that for you.

Is this the main reason Kohlberg bought Steinway? The "Steinway Mystique"? If so, it will add nothing to their bottom line; as a matter of fact the Steinway holdings will become a loss center (it already is). They'll try to maximize profits by cutting costs, firing staff, changing production methods (sound familiar?), putting more responsibility on the dealers, and pumping more money into marketing. When those things don't produce the remarkable results investors and Boards expect, they'll move the works to China or Bangladesh like everybody else doing Big Business these days. These maneuvers will not make a better expensive piano, because pianos are not expensive purses with a fancy logo stamped all over them.

Now, this has not happened yet, and I could be very wrong about the whole thing (in which case I'll be very pleased and happy to say so). But it would take an enlightened management team with a whole pile of cash and no concerns about the profits to avoid it.

News Flash: None of the key players are enlightened.

As a matter of fact, the bean counters who advise the parent corporation have no imagination whatsoever, and must be spoon-fed every thought, condition and idea. The turn of events simply cannot end well.

I've got my ash bucket almost full. Had to clean out my wood stove anyway, as the chimney sweep is coming for the annual cleaning this week.

Now I just wonder when the mourners are showing up...
Posted by: laguna_greg

Re: Steinway Bought Out and Going Private - 07/03/13 01:05 PM

Originally Posted By: Steve Cohen
All this doom and gloom conjecture is WAY premature. As has been pointed out many times, the piano industry is rather unique. This case is no exception.

Also, there are many factors in play that most posters here are completely unaware of.


Hi Steve,

This might be the case. Care to share any of them with us?

The wine industry is also unique. Globalization and Robert Parker have changed it completely, and not for the better. If you've got a different comparison to make, I'd be relieved to hear it.
Posted by: Withindale

Re: Steinway Bought Out and Going Private - 07/03/13 01:17 PM

You'll get us all going soon, Greg.

What about the world's leading pianists prostituting themselves to asset strippers and brand marketeers with no interest in their artistry?

And Steinways in stacked up in supermarkets like wine and on Amazon like everything else ... but my guess is that Hamburg at least will be OK.
Posted by: laguna_greg

Re: Steinway Bought Out and Going Private - 07/03/13 01:19 PM

Marty,

"However, I doubt that the writers at "Market Place" are a PR team."

Do you know anything about reporters? Have you ever been interviewed by one? That blurb came right out of a press release written by the holding company PR team.

You can't possibly think that a busy, underpaid reporter at NPR did more than spend 5 minutes reviewing the press kit Kohlberg sent over before putting their piece together and going on the air with it?
Posted by: Steve Cohen

Re: Steinway Bought Out and Going Private - 07/03/13 01:37 PM

Originally Posted By: laguna_greg


Hi Steve,

This might be the case. Care to share any of them with us?



Sure. My rate is $125/hr. with a 4 hour minimum.
Posted by: Plowboy

Re: Steinway Bought Out and Going Private - 07/03/13 01:49 PM

Originally Posted By: Steve Cohen
Originally Posted By: ClsscLib
We're all pretty sure about what's going to happen, aren't we?


The assumptions many make here, without really knowing the facts, are astounding!


I'm going by what happened to my baker's pension after the "investment group" that purchased Wonder Bread and Hostess was finished pillaging the company. They took a company with small but steady profit and raped it. When they were done, they were filthy rich, the company was bankrupt and they got the press top blame it on the same workers that they had spent the last 10 years screwing over.

Hopefully, Kohlberg is an enlightened outfit that will invest heavily and improve Steinway. Some feel that selling Steinway is not in the best interest of the stockholders, that there is a lot of upside to holding onto it.
Posted by: Plowboy

Re: Steinway Bought Out and Going Private - 07/03/13 01:50 PM

Originally Posted By: Steve Cohen

Sure. My rate is $125/hr. with a 4 hour minimum.


Oops! I read that as "a 4 drink minimum."
Posted by: ClsscLib

Re: Steinway Bought Out and Going Private - 07/03/13 03:00 PM

Originally Posted By: Steve Cohen
Originally Posted By: laguna_greg


Hi Steve,

This might be the case. Care to share any of them with us?



Sure. My rate is $125/hr. with a 4 hour minimum.


And a bargain at that!

Signed,
Satisfied Client
Posted by: laguna_greg

Re: Steinway Bought Out and Going Private - 07/03/13 04:00 PM

Hi Steve,

So...you're just teasing?

Or you really don't know anything, like the rest of us?
Posted by: laguna_greg

Re: Steinway Bought Out and Going Private - 07/03/13 04:07 PM

Hi Ian,

Oh, I really hope you're right about Hamburg!
Posted by: Steve Cohen

Re: Steinway Bought Out and Going Private - 07/03/13 04:52 PM

Originally Posted By: laguna_greg
Hi Steve,

So...you're just teasing?

Or you really don't know anything, like the rest of us?


Not teasing at all. I am a professional (read "paid") consultant. I have extensive connections that I have cultivated for many years, including the principals of virtually every piano manufacturer. And I hear many things others do not.

Information is an asset, and a market I deal in.
Posted by: BerndAB

Re: Steinway Bought Out and Going Private - 07/03/13 05:01 PM

Originally Posted By: laguna_greg
Hi CC,

Joe88 has posted a few times about about having to perform on badly prepped Hamburgs.


It's a difference whether one performs on new Hamburg ones or on old ones.. wink
Posted by: Steve Chandler

Re: Steinway Bought Out and Going Private - 07/03/13 05:27 PM

Originally Posted By: CC2 and Chopin lover
What does it say about a company that thinks it's OK to send out an instrument that someone is expected to pay 50, 60, 70 or $110K for in LESS than 110% "optimum" playing condition? Mind you, they are also not willing to discount a dime off that outrageous price, because, after all......"it's a Steinway"!! From my perspective, the best thing these new owners could do for that company is fire everyone in the New York office/factory and replace them with personnel from Hamburg.

You've been around here for a while so you should be aware that Steinway offers two levels of prep to dealers, no prep and mostly prepped. The difference being that no prep costs less. Consequently that's the one most dealers buy because they figure they can prep pianos for those who are players and save a few $$ (more profit) when someone buys a piano for furniture. The company is not shifting burden to unwilling dealers, quite the opposite!
Posted by: laguna_greg

Re: Steinway Bought Out and Going Private - 07/03/13 06:01 PM

Hi Steve,

"Not teasing at all. ... Information is an asset, and a market I deal in."

Are you trying to tell us you know something that we don't?

BTW, nobody here's going to pay you anything to hear it, so just say so if you're just giving us a high sign!
Posted by: laguna_greg

Re: Steinway Bought Out and Going Private - 07/03/13 06:09 PM

HI Bernard.

You'll have to ask him. Since he gives more than 30 concerts a year, I'm assuming he can tell you the difference.
Posted by: Steve Cohen

Re: Steinway Bought Out and Going Private - 07/03/13 06:46 PM

Originally Posted By: laguna_greg
Hi Steve,

"Not teasing at all. ... Information is an asset, and a market I deal in."

Are you trying to tell us you know something that we don't?

BTW, nobody here's going to pay you anything to hear it, so just say so if you're just giving us a high sign!




False premises lead to false conclusions.

Keep in mind these are not snap decisions by the principals, but part of long-term planning.
Posted by: Norbert

Re: Steinway Bought Out and Going Private - 07/03/13 07:03 PM

Quote:
False premises leads to false conclusions.


Right conclusions will always be same:

"what will be will be"

Highest bidder wins.

Now and - in future.

Norbert shocked
Posted by: laguna_greg

Re: Steinway Bought Out and Going Private - 07/03/13 10:00 PM

Hi Steve,

Look, it's nice that you get paid to give your opinion to the industry. I'm also a leading expert in one of the fields I work in, with many publications to my credit, so at times I also am paid to give an opinion, often under oath, in front of a judge or a clerk of the court, and with much higher stakes. And for a bigger hourly than you, apparently. You'll find a link to my company bio in my signature line, and I also have a detailed CV in Linked in as do you.

I recognize when somebody is being coy. Fine, be that way.

However, since you are not willing to share your information freely, everything you say is suspect, every single thing. You could be:

1- Just trying to get attention for yourself and thereby promote your own brand, or

2- Shilling for the New Steinway to protect the brand, as a paid consultant. Either way, it's a complete waste of our time. shocked

I do hope you'll forgive my and other people's cynicism on this count. You've posted here many times in a way that was exemplary. But, really, your behavior right now is driving me and a few others to doubt you. It looks like you might still be working solely for the industry, the way you're posting. Since you won't say anything, how do we know your posts here are not just another (paid) bullet-point of a larger PR campaign to maintain sales of an (now) ailing brand during transition? Many of us have seen this happen far too often to pretend this is not likely.

Such behavior gives the piano industry a bad rep.

I am unimpressed with your claims of "long-range planning". The principals are not Japanese, who do this on a consistent basis and with some limited success. Westerners are constitutionally or philosophically incapable of doing anything close to it. Not to mention that not even the Japanese expected their economy to be in a stagflationary slump for 10+ years because they planned wrong this once.

Really.

Please! Stop being so coy and prove me wrong! I'm begging you! Say the Right Thing Now!!!

Posted by: laguna_greg

Re: Steinway Bought Out and Going Private - 07/03/13 10:06 PM

Norbert,

Did I tell you lately how much I appreciate your clear-sighted, disinterested comments here, more and more?

I must have forgot today...
Posted by: laguna_greg

Re: Steinway Bought Out and Going Private - 07/03/13 10:16 PM

You know, it just occurred to me:

If the New Steinway brand, post-acquistion, continues to put out mediocre instruments or worse, all we're going to do in our comments here is kvetch and complain about how dismal the New Steinways are, sort of how we've been complaining, only more so, much much more.

Something for the "industry" to consider...

...do you think they actually read these posts...

...oh my...

...if that happens, are you going to sue Piano World like those other industry reprobates? Case law stands against the approach...
Posted by: Bob

Re: Steinway Bought Out and Going Private - 07/03/13 10:22 PM

Originally Posted By: GGO
My concern is that Steinway staff members would be worried / distracted and some re-structuring may be taking place...Is it a good or bad timing to get a factory order new NY Steinway?


Look, we don't even know if the sale will go though. There is a wait period during which other bids will be considered. Perhaps Samick will bid in? Let's all calm down a bit, and see what happens.

Posted by: laguna_greg

Re: Steinway Bought Out and Going Private - 07/03/13 10:25 PM

Hi Bob,

Since the press release has already gone out on several media organs, it's a safe bet that the deal will go through. BTW, I don' think Samick can offer the same deal as Kohlberg. Since the S&S is publicly traded, the SEC will have a lot to say about how the deal is settled, which may preclude choosing one buyer over another based on industry standing or philosophical intent.
Posted by: Bob

Re: Steinway Bought Out and Going Private - 07/03/13 10:30 PM

Steinway can accept other offers for 45 days, I think the time period was.
Posted by: laguna_greg

Re: Steinway Bought Out and Going Private - 07/03/13 10:46 PM

Oh, of course they can, as they are publicly traded and therefore the sale is governed by the SEC. But that's just like the last time I submitted a government bid. Before I got to the first bid/procurement meeting, and even though my company was obviously the best service provider among those who were bidding, the department had already picked their preferred vendor, before RFQs were even issued. There was nothing I could say or do.

Kohlberg will certainly be the successful bidder.
Posted by: jmcintyre

Re: Steinway Bought Out and Going Private - 07/03/13 10:56 PM

Originally Posted By: laguna_greg
However, since you are not willing to share your information freely, everything you say is suspect, every single thing. You could be:
(snip)

He also could be under a non-disclosure agreement if he's a paid consultant. His statements are suspect only to the extent to which you're suspicious of them. Just sayin'.
Posted by: Jonathan Baker

Re: Steinway Bought Out and Going Private - 07/03/13 10:57 PM

I was in the Steinway showroom on 57th Street last month with a student. We tried out every grand on the main floor, focusing primarily on the B and D models.

There was only one rebuilt instrument on the floor on that day - a Steinway C, I think around 1890 - that triumphed over every grand in the showroom, and triumphed by far. There was simply no comparison. I have encountered this repeatedly with excellent rebuilds of large Steinway grands of the pre-war era. That bronze tone is unique and magnificent, fully justifying the legend of Steinway.

I would be delighted if some billionaire bought up Steinway for the sole purpose of restoring Steinway to its former glory. But I have not gotten any indication that this is what is happening, although I would be happy to be proved wrong.

BTW, the uprights carry rather aristocratic price tags, and I would not put forth that kind of money when I know I could get better tone for less dollars elsewhere.
I don't like to criticize like that, but I have had to guide students to other makers because of this (and I do not take commissions on sales).
Posted by: ClsscLib

Re: Steinway Bought Out and Going Private - 07/03/13 11:03 PM

So we have, on the one hand, a consultant on repetitive stress injury; and on the other, a widely recognized authority on piano industry operations, practices, and strategic planning.

If I have a question about repetitive stress, I know exactly who I'll be calling.

In the meantime, as someone who has practiced a lot before the SEC, let me tell you that the SEC could care less about merits of an acquisition bid or the strategic visions of competing bidders. That's not what the SEC does.

Rather, their interest is in making sure that the required disclosure documents satisfy the rather technical disclosure requirements of the federal securities laws. If they do, then the SEC won't give a fig about what will happen to the acquired company under one scenario or another. Under the securities laws, that's for the market to decide.
Posted by: laguna_greg

Re: Steinway Bought Out and Going Private - 07/03/13 11:24 PM

Hi Classic,

I'm with you on that score. The SEC will let the market decide. Eeeewwww, how nasty....the Market is never kind to Art....

...thank you for proving my point for me again, especially about the bottom line...

BTW, if you ever have a hand or wrist problem, call me first. I'll give you the first hour for free (and I don't give that to just everybody, the law usually prevents it...). I won't bother to lie to you...

BTW, I would LOVE to be proved wrong about this. When will we read something from the industry experts that will convincingly contradict what I've been posting?

...(waiting)....(waiting)...


Posted by: laguna_greg

Re: Steinway Bought Out and Going Private - 07/03/13 11:28 PM

Originally Posted By: jmcintyre
e under a non-disclosure agreement if he's a paid consultant. His statements are suspect only to the extent to which you're suspicious of them....


Hi JM,

Which means that, if he has indeed signed a non-disclosure agreement, every public pronouncement he makes must satisfy and protect his contracted and de facto or implied fiduciary interests to all the signatories, not to ours...which makes him a shill for industry, as I said earlier...

...all the more reason to disbelieve...

...just sayin'...thanks for proving my point...

Posted by: laguna_greg

Re: Steinway Bought Out and Going Private - 07/03/13 11:31 PM

Hi Jonathan,

I know exactly what you mean. Such a pity that upper management ignores your post. Perhaps that will change after the sale goes through...
Posted by: Stephen Lacefield

Re: Steinway Bought Out and Going Private - 07/04/13 12:46 AM

"I don't know who you are. I don't know what you want. If you're looking for ransom, I can tell you I don't have money but what I do have are a very particular set of skills. Skills I have acquired over a very long career. Skills that make me a nightmare for people like you."
Posted by: laguna_greg

Re: Steinway Bought Out and Going Private - 07/04/13 01:12 AM

HI Stephen,

LOLOLOLOLOLOL

shocked mad frown smile laugh
Posted by: phacke

Re: Steinway Bought Out and Going Private - 07/04/13 02:29 AM

Originally Posted By: Steve Cohen
Originally Posted By: laguna_greg
Hi Steve,

"Not teasing at all. ... Information is an asset, and a market I deal in."

Are you trying to tell us you know something that we don't?

BTW, nobody here's going to pay you anything to hear it, so just say so if you're just giving us a high sign!




False premises lead to false conclusions.

Keep in mind these are not snap decisions by the principals, but part of long-term planning.


I am sure there is a soap opera xyz around it, but profit margins around 4% and your capital doing just as well or better in an index fund without the hassle, you look for an exit.

It was a similar scenario for the Steinway family shareholders' sell to CBS.
Posted by: phacke

Re: Steinway Bought Out and Going Private - 07/04/13 02:38 AM

Originally Posted By: Minnesota Marty
"Market Place" on NPR had an interesting viewpoint on the sale. They seemed to indicate that the investment group is looking for "Luxury" manufacturers and want to polish the image and not destroy the company. They are going after high tag portfolio investors who get in their private jet to go pick out a Steinway. They also indicated the growing market in China is a target and that there is the cash available for individuals to buy an 'imported' piano. It really didn't seem like S&S would start building in China. Essex already caters to a specific market very well.


I am glad the new owners have a dream, but it isn't like the previous owners didn't have this vision and execution strategy either. I saw Steinway ads in Asia during my last travels there, Steinway is already leveraging their name into other products. Sure, the new guys think they are going to do it mo fasta, mo betta. But, with more debt. I don't see the net good, but time will tell.
Posted by: CC2 and Chopin lover

Re: Steinway Bought Out and Going Private - 07/04/13 06:22 AM

Quote:
You've been around here for a while so you should be aware that Steinway offers two levels of prep to dealers, no prep and mostly prepped. The difference being that no prep costs less. Consequently that's the one most dealers buy because they figure they can prep pianos for those who are players and save a few $$ (more profit) when someone buys a piano for furniture. The company is not shifting burden to unwilling dealers, quite the opposite!


If that's truly Steinway New York's business model, then they are even bigger fools than I suspected. You place the reputation of your company and product in the hands of dealers who could care less? Ask Rich Galassini or Ori Bukai if they would EVER consider placing one of the incredible instruments on their sales floor in LESS than optimally prepped condition, in the hopes of selling it to some "furniture" customer.
Posted by: R_B

Re: Steinway Bought Out and Going Private - 07/04/13 08:56 AM

Originally Posted By: ClsscLib
We're all pretty sure about what's going to happen, aren't we?


The "What" ? Yes.
The "How" ? is TBD.

The "What" is that as a company Steinway is hurting and probably can't survive much longer in its present condition (business model, way of working, current and anticipated market, etc.) it therefore needs some sort of a "turnaround".

The "How" COULD (may or may not) mean extending "down market", asset stripping, whatever all else.
Kinda depends on what the new owners' motivations are and we are GUESSING on those.
Not saying our guesses are right or wrong, not saying that the new owners have fully formed their plans yet, just saying that WE are guessing WRT the "How".

OTOH maybe they are going the way of Kodak;
I dunno bout this Polaroid stuff and digital cameras and such, but we have been in wet photography since the beginning and the Brownie brought home snapshots to EVERYONE.
Posted by: Steve Cohen

Re: Steinway Bought Out and Going Private - 07/04/13 09:23 AM

It is rather amazing that people with no depth of knowledge in the piano industry would consider their conjecture in these matters as fact.
Posted by: Ed Foote

Re: Steinway Bought Out and Going Private - 07/04/13 09:48 AM

Greetings,
There are many avenues down which Steinway and Sons may be taken. For the musician, the desired route is the one that leaves us with dependably consistent, even, responsive, instruments. There is only one way for that to happen, and it takes faith to make the investment.

The only way to glory is if the new owners decided to invest more money in improving the skills of the people that build these pianos, and spending the time required for them to operate at the 100% level. It would mean scrapping more plates, rims, wood, etc, to keep the quality as high as it was in the 1920's. These pianos are handmade, and their quality reflects, in a manner becoming increasingly rare, the direct manual skills of the assemblers. A happier bellyman is going to do a better job notching that bridge.

The amount of time given the workers, and their attitude towards their work, shows up in these pianos. If the new owners want to keep the reputation, they will have to invest after the purchase. If the purchase was all the investment the new owners are willing to make, we will see the name watered down and the marque begin its drift backwards through history.

Regards,
Posted by: Withindale

Re: Steinway Bought Out and Going Private - 07/04/13 09:55 AM

Originally Posted By: R_B
Originally Posted By: ClsscLib
We're all pretty sure about what's going to happen, aren't we?

... kinda depends on what the new owners' motivations are and we are GUESSING on those...

Quite right, guesswork is so much fun.

Kohlberg appear to have a well established business model and you can see how they apply it by looking at their investments, all emblazoned across their website.

The press release clearly states their intentions - but nobody believes a word of that, do they?

When you spend $400 million on a brand like Steinway and your aim is to maximize what it realizes in a few years time, what would you do, and why should Kohlberg do anything else - unless they are incredibly smart or amazingly stupid?

Of course they may strip out under performing assets, flog off the instruments, introduce better business practices, but won't the price new owners are prepared to pay for Steinway ultimately depend the quality of the pianos?
Posted by: Hakki

Re: Steinway Bought Out and Going Private - 07/04/13 10:31 AM

Originally Posted By: Steve Cohen
It is rather amazing that people with no depth of knowledge in the piano industry would consider their conjecture in these matters as fact.


Don't overestimate yourself.

More or less other people here can guess what will happen with such takeovers.
Posted by: Numerian

Re: Steinway Bought Out and Going Private - 07/04/13 10:40 AM

Kohlberg is not buying Steinway for $438 million. They are valuing Steinway at $438 million, if everyone tenders their shares at $35/share. How much of its own and its investors money Kohlberg is putting into Steinway isn't clear, but in deals of this nature, it could be $100 million or less. The rest of the $438 million used to purchase the open market shares is being financed by debt, and the debt isn't being taken on by the investors. The debt is taken on by Steinway, and collateralized with every asset the firm has. Nor will the interest rate be cheap, because now Steinway will be valued as a junk debt company by the banks doing the financing.

Without debt these deals don't work for private equity investors. These investors are seeking returns beyond what they can get in bonds or most stocks. When Steinway is cleaned up and fluffed up for its next buyer(s), the private equity investors consider a 20% p.a. return on their investment to be respectable. Most often, the company being bought and sold, when all is said and done, is left with the debt, and there are well known instances where the company lasts only a few years longer before collapsing under the burden of the debt. Kohlberg, fortunately, is not as rapacious as some private equity firms. They tend to keep debt levels minimal, they like to keep existing management involved, and they aren't the sort of firm to declare a fat dividend for themselves in the first six months of ownership (and that dividend can only come from the proceeds of further debt, since these companies are not that profitable so quickly).

A lot depends therefore on how much Kohlberg is putting in of its own money vs. how much debt it is loading on to Steinway's financial burdens. It also matters greatly what sort of return on investment Kohlberg is aiming for. The days of 20% annual returns on private equity deals seem increasingly part of the go-go 90s and 00s, never to return in our lifetime. A more suitable return is 10% or under, and if an investor wants real safety in something like Treasury securities, it is 3% or under.

One other strange thing about this deal is, why now? If Steinway is so attractive as a private equity buyout, it would have been vastly more attractive three years ago when the stock was 70% cheaper. It's very easy to see why Steinway management climbed aboard this deal so fast. After watching their stock recover 70% in the market, for someone to come along and pay a 15% premium on top of that is almost too good to be true.
Posted by: Withindale

Re: Steinway Bought Out and Going Private - 07/04/13 11:36 AM

Originally Posted By: Numerian
Kohlberg is not buying Steinway for $438 million. They are valuing Steinway at $438 million, if everyone tenders their shares at $35/share.

To clarify, $438 million would be paid out to acquire all the shares if the deal goes through?
Posted by: Del

Re: Steinway Bought Out and Going Private - 07/04/13 12:03 PM

Originally Posted By: laguna_greg
...This is conceivably worse than when CBS took over. I'm quite shocked the rest of you don't see it regardless of what you read in the papers.

And I am shocked to see that there are some people who view the CBS buyout as such a negative thing. Without that buyout it is a near certainty that there would no longer be a Steinway company. Under private ownership both the factory and the product had been allowed to deteriorate almost to the point of no return when CBS came along and started pouring money into the place. To be sure, management could have been more stable and, perhaps, more enlightened during those years but CBS did salvage the company from oblivion and at least started it on the path back from the abyss.

ddf
Posted by: BDB

Re: Steinway Bought Out and Going Private - 07/04/13 12:12 PM

It sounds as if there have been incremental improvements to the corporate structure and the business ever since the family gave up control, which sounds logical. It may have been too much for one owner to do all at once, but it seems it is a continuing process.
Posted by: ClsscLib

Re: Steinway Bought Out and Going Private - 07/04/13 01:03 PM

Originally Posted By: laguna_greg
Hi Classic,

I'm with you on that score. The SEC will let the market decide. Eeeewwww, how nasty....the Market is never kind to Art....

...thank you for proving my point for me again, especially about the bottom line...



Alas, I cannot claim credit for such an achievement. It may be that the market is not kind to art, but Mr Kohlberg himself and his former partner Mr Kravis and others in their business have voluntarily done a great deal for art in NY and elsewhere over the years. Just sayin'.

As to piano manufacture, it is precisely the market that has given us the present array of choices of pianos at all levels. Are the choices all that unsatisfactory?

If you want a really inexpensive piano of a certain type and size, you can buy a Young Chang or the like.

If you want a somewhat more refined piano at a very competitive price, you can step up to some of the more established Chinese brands.

Then you have Kawai and Yamaha.

Or Mason or Estonia or August Forster or Charles Walter or Schimmel.

Steinway lovers can get Steinways out of either NY or Hamburg (and whatever happens to the company post-acquisition, there will still be plenty of pre-2014 Steinways on the market for generations to come).

And the market is supplying no scarcity of top-tier pianos, either. None of the other makers has the Steinway marketing machine, but a pianist who can't find a satisfactory instrument among the Bluthners, Sauters, Shigerus, Grotrians, Bosendorfers, Faziolis, Steingraebers, and others in that tier just isn't trying very hard.

It's certainly possible that the buyers in the Kohlberg deal may have some strategy for making money off the Steinway name that entails degradation of piano output. To someone who knows more about business than music, it's hard to see that happening.

The Steinway mark is the crown jewel in the Steinway empire. It would be economically irrational to devalue that mark. The mark is inextricably linked to the perceived quality of Steinway pianos. Ruin the quality, and you ruin the value of the mark, and with it the key value element in the deal. Believe me, Kohlberg is not buying Steinway so that it can sell spools of piano wire on E-Bay.

I agree that the Kohlberg folks want to profit from this acquisition. I cannot see any way they would have a plan to do so that would involve the production of pianos below the current Steinway standard.

But if they do, the acquisition will fail; there will still be many, many other great piano choices (thanks to the market); and someone else will step in to acquire the Steinway piano line at a bargain price and capitalize on that maker's name and history. In fact, I speculate that Steve Cohen's secret strategy may be precisely that. smile

Posted by: Norbert

Re: Steinway Bought Out and Going Private - 07/04/13 01:28 PM

Quote:
When Steinway is cleaned up and fluffed up for its next buyer(s), the private equity investors consider a 20% p.a. return on their investment to be respectable.


Thinking therein lies the rationale for the whole thing.

IMHO "next buyer" is the one to watch out for.

Guarantee several ones out there are watching already..

Norbert
Posted by: Jonathan Baker

Re: Steinway Bought Out and Going Private - 07/04/13 01:36 PM

Originally Posted By: Ed Foote
The only way to glory is if the new owners decided to invest more money in improving the skills of the people that build these pianos, and spending the time required for them to operate at the 100% level. It would mean scrapping more plates, rims, wood, etc, to keep the quality as high as it was in the 1920's. These pianos are handmade, and their quality reflects, in a manner becoming increasingly rare, the direct manual skills of the assemblers. A happier bellyman is going to do a better job notching that bridge.

The amount of time given the workers, and their attitude towards their work, shows up in these pianos. If the new owners want to keep the reputation, they will have to invest after the purchase. If the purchase was all the investment the new owners are willing to make, we will see the name watered down and the marque begin its drift backwards through history.


Hello Ed,

I am not a mind-reader so I have no idea what the new owners actually think they are up to, but I am curious about the business end of pricing. For instance, if someone is able to put out $85,000 for a Steinway B (more or less) are they then willing to put up $95,000 or $110,000? What I am referring to is a certain income level. Someone whose annual income is $60,000 will naturally be constricted in their choices, unlike someone who makes ten times that amount. So what is the financial profile of the average consumer of a new Steinway? Perhaps only Steinway knows (if they have been doing their market research).

And I bring that up only to circle around to your point about improving Steinway to its former status. The extra cost this may incur would be forwarded to the consumer, but I would think that someone who can afford a Steinway B or D off the showroom floor is not doing so to save pennies because a Bosendorfer is over their budget.

I had a student who, without consulting me, walked into Steinway during his lunch hour and bought a glossy white John Lennon Special Edition piano for over $100,000. I almost fainted when he told me. LOL. But some people have that spending power and the difference of, say, $20,000, means little or nothing to them.

I had several other students who bought new Steinways not because they really new what they were getting in terms of tone and quality (they were not advanced students) but because of the 'safety' of the Steinway label. Rather like buying a Bentley, one presumes it is well made.

As for the pricing of uprights, well, that is a completely different matter. And as I indicated in a previous post, I think Steinway needs to get a reality-check on the competition if they want to compete effectively.
Posted by: laguna_greg

Re: Steinway Bought Out and Going Private - 07/04/13 02:00 PM

Originally Posted By: Del

And I am shocked to see that there are some people who view the CBS buyout as such a negative thing. Without that buyout it is a near certainty that there would no longer be a Steinway company.

ddf


Hi Del,

You are are absolutely right about that. I don't mean to criticize CBS for their business acumen, or the major role they played in resurrecting the brand. Because they did play such a role.

But you can't pretend, and I mean this with all due respect to your experience and deep understanding in this area, that there wasn't a noticeable falling off in quality of the product from almost the end of WWII to the end of the 1980s. That's a long time to make and sell not-so-great pianos at top prices. Since it was bought back, the output has been uneven and not always comparable with 1- their best products during their best years, or 2- the best products of contemporary top-tier makers.
Posted by: Numerian

Re: Steinway Bought Out and Going Private - 07/04/13 02:00 PM

Can't disagree with anything ClsscLib said. The new owners are going to have to find the right balance between making operations more efficient, and not damaging the brand. My only concern is that given the short term nature of these deals, they may not notice any significant damage until well after they have sold their investment and reaped their profits.

On the question of the luxury market, a lot of high end piano manufacturers noticed a significant fall-off in business when the recession hit in 2008. This was predictable because many people were buying luxury goods using home equity lines of credit as a means of financing the purchase. It was easy, and it was deceptive, because banks marketed the loans as "taking out your hard earned cash from your house". Once the spigot dried up, all elements of the housing market, including pianos, were hurt. This was a US phenomenon, but the housing bubble reached many other countries, including China. A lot of dealers said at least 30% of their business was lost when the bubble burst.

That leaves just the traditional buyers: the occasional wealthy person, institutions like churches, and music lovers. This last group does not consist of wealthy people. Music lovers will make real financial sacrifices and go into debt purposely to get the piano they love. I'm sure Steinway, who make 4000 pianos a year at different price levels, is well aware of this group of stable customers. They just have to make the Kohlberg people aware of them as well.
Posted by: laguna_greg

Re: Steinway Bought Out and Going Private - 07/04/13 02:13 PM

Hi Class,

(can I write it that way?)

"As to piano manufacture, it is precisely the market that has given us the present array of choices of pianos at all levels. Are the choices all that unsatisfactory?"

Not at all! As a matter of fact, the consumer has more choices for pianos at every range of quality and performance then they've ever had. It is easier to buy a well-made, quality piano now than it has been since before WWII.

"The Steinway mark is the crown jewel in the Steinway empire. It would be economically irrational to devalue that mark. The mark is inextricably linked to the perceived quality of Steinway pianos. Ruin the quality, and you ruin the value of the mark, and with it the key value element in the deal. Believe me, Kohlberg is not buying Steinway so that it can sell spools of piano wire on E-Bay."

You are absolutely right, and I agree 100% with that. But having said that, we must both concede that everybody has different ideas about how to achieve such a goal, sort of like what Numerian said. An investment banker or accountant will not see the issue the same way a piano technician does. As I just posted a second ago, a lack of coherent direction and some rather ham-handed ideas gave us 30 years of not-so-good quality S&Ss. Fortunately for them, the S&S marketing machine overcame whatever perceptions the public might have developed to 1- maintain prices and sales during this period, and 2- successfully promote the brand image and mystique. It's rather ominous to me how the right marketing campaign can often convince the public to buy anything of poor quality, not just pianos.

Are we going to see this happen again? That's my concern.

Posted by: ClsscLib

Re: Steinway Bought Out and Going Private - 07/04/13 03:20 PM

Originally Posted By: laguna_greg
Hi Class,

(can I write it that way?)...



I've certainly been called by worse names than that! Even "evil genius" once. They got that half right.
Posted by: patH

Re: Steinway Bought Out and Going Private - 07/04/13 05:00 PM

After reading most comments on this thread I can say: I don't really have an opinion about the sale.
I know that Bösendorfer has been bought by Yamaha, and Seiler by Samick. It didn't hurt the top tier companies; but then, Yamaha and Samick are music instrument manufacturers. Kohlberg isn't.

My guess for the best-case scenario for Steinway would be: Kohlberg changes things in management, and somehow manages to restructure Steinway so that they still make good pianos, but with less cost; and the value of the company goes up. Then, after a few years, Kohlberg sells Steinway to a huge music instruments manufacturer, and everybody is happy.
I can even think of two logical choices for the next-to-next owner of Steinway: Kawai or Pearl River. No need to leave Boston or Essex to come to New York or Hamburg.
Posted by: Steve Cohen

Re: Steinway Bought Out and Going Private - 07/04/13 05:25 PM

Originally Posted By: laguna_greg
It's rather ominous to me how the right marketing campaign can often convince the public to buy anything of poor quality, not just pianos.

Are we going to see this happen again? That's my concern.



Could they build Boston's competitively in a new plant in the U.S. and market it successfully? Could that be a stepping stone to moving Steinway's factory and selling the Astoria property? Would that satisfy a private equity firm's goals, or a piano industry investor's?


[The questions above are based solely on conjecture.]
Posted by: Minnesota Marty

Re: Steinway Bought Out and Going Private - 07/04/13 06:05 PM

Originally Posted By: laguna_greg
It's rather ominous to me how the right marketing campaign can often convince the public to buy anything of poor quality, not just pianos.

Do you believe this applies to Steinway?
Posted by: Ed McMorrow, RPT

Re: Steinway Bought Out and Going Private - 07/04/13 07:02 PM

It would be interesting to know what role the present owner of 40% 0f the Steinway stock, (I believe his name is Mr. Lee, the owner of Samick pianos) is slated to play with Steinway or Kohlberg.
Posted by: Steve Cohen

Re: Steinway Bought Out and Going Private - 07/04/13 07:59 PM

Originally Posted By: Ed McMorrow, RPT
It would be interesting to know what role the present owner of 40% 0f the Steinway stock, (I believe his name is Mr. Lee, the owner of Samick pianos) is slated to play with Steinway or Kohlberg.


At least someone is asking a pertinent question.

It leads to another question: Could they realistically do all of this without Chairman Lee's support?
Posted by: ClsscLib

Re: Steinway Bought Out and Going Private - 07/04/13 08:02 PM

Originally Posted By: Steve Cohen
Originally Posted By: Ed McMorrow, RPT
It would be interesting to know what role the present owner of 40% 0f the Steinway stock, (I believe his name is Mr. Lee, the owner of Samick pianos) is slated to play with Steinway or Kohlberg.


At least someone is asking a pertinent question.

It leads to another question: Could they realistically do all of this without Chairman Lee's support?


If he really owns 40% of the stock, it would be almost impossible without his support -- and almost inconceivable that the Board would have recommended the deal.
Posted by: Norbert

Re: Steinway Bought Out and Going Private - 07/04/13 08:23 PM

Quote:
Then, after a few years, Kohlberg sells Steinway to a huge music instruments manufacturer, and everybody is happy.
I can even think of two logical choices for the next-to-next owner of Steinway: Kawai or Pearl River.


Well, only one of them will have the money to do so...

[not a particular pleasant thought on July 4th...]

Norbert shocked
Posted by: ClsscLib

Re: Steinway Bought Out and Going Private - 07/04/13 08:41 PM

Apologies if this has already been posted:

http://www.marketwatch.com/story/the-mus...mod=marketwatch
Posted by: Steve Cohen

Re: Steinway Bought Out and Going Private - 07/04/13 08:44 PM

Originally Posted By: ClsscLib
Originally Posted By: Steve Cohen
Originally Posted By: Ed McMorrow, RPT
It would be interesting to know what role the present owner of 40% 0f the Steinway stock, (I believe his name is Mr. Lee, the owner of Samick pianos) is slated to play with Steinway or Kohlberg.


At least someone is asking a pertinent question.

It leads to another question: Could they realistically do all of this without Chairman Lee's support?


If he really owns 40% of the stock, it would be almost impossible without his support -- and almost inconceivable that the Board would have recommended the deal.


Exactly!
Posted by: pianoloverus

Re: Steinway Bought Out and Going Private - 07/04/13 08:47 PM

Originally Posted By: ClsscLib
Apologies if this has already been posted:

http://www.marketwatch.com/story/the-mus...mod=marketwatch
That article is filled with so many factual errors it's almost beyond belief.

Just a few of them:

Steinways appreciate at 4% a year.

The company has raised its prices every year since its 1853 founding.

A used Steinway goes for about 75% less than a new one.

A properly maintained Model D concert grand piano that sold for $13,500 in 1975 is worth $137,400 today.

A smaller Model S — just over five feet long and can fit in a living room — sold for $5,540 in 1975 and is similarly worth 10 times that amount today.
Posted by: carey

Re: Steinway Bought Out and Going Private - 07/04/13 09:23 PM

Originally Posted By: pianoloverus
Originally Posted By: ClsscLib
Apologies if this has already been posted:

http://www.marketwatch.com/story/the-mus...mod=marketwatch
That article is filled with so many factual errors it's almost beyond belief.

Just a few of them:

Steinways appreciate at 4% a year.

The company has raised its prices every year since its 1853 founding.

A used Steinway goes for about 75% less than a new one.

A properly maintained Model D concert grand piano that sold for $13,500 in 1975 is worth $137,400 today.

A smaller Model S — just over five feet long and can fit in a living room — sold for $5,540 in 1975 and is similarly worth 10 times that amount today.


And apparently the factual errors can be attributed to Anthony Gilroy, Steinway's Director of Marketing and Communication. crazy
Posted by: jazzyprof

Re: Steinway Bought Out and Going Private - 07/04/13 09:43 PM

Originally Posted By: ClsscLib
Apologies if this has already been posted:

http://www.marketwatch.com/story/the-mus...mod=marketwatch


"A used Steinway goes for about 75% less than a brand-new one,"

75% less than a brand new one means that if a brand new one costs $100,000, the used Steinway costs $25,000. What a bargain! grin
Posted by: R_B

Re: Steinway Bought Out and Going Private - 07/04/13 09:46 PM

Originally Posted By: Steve Cohen
It is rather amazing that people with no depth of knowledge in the piano industry would consider their conjecture in these matters as fact.


The advantage of being far enough back from the woods to see the trees - or somesuch saying.
(-:
Understanding the nitty gritty details CAN cloud one's vision.

As a BUSINESS they don't have to understand the finer details of piano (or whatever other product) construction.
Materials + value add + profit = price.

Value add includes mystique, reputation, etc. and of course Mahh_ketting.
Posted by: ClsscLib

Re: Steinway Bought Out and Going Private - 07/04/13 10:23 PM

Originally Posted By: R_B


...Materials + value add + profit = price....



Not really. Price equals what the buyer is willing to pay to a seller willing to sell.

Period.
Posted by: Del

Re: Steinway Bought Out and Going Private - 07/04/13 10:42 PM

Originally Posted By: laguna_greg
Originally Posted By: Del

And I am shocked to see that there are some people who view the CBS buyout as such a negative thing. Without that buyout it is a near certainty that there would no longer be a Steinway company.

ddf


Hi Del,

You are are absolutely right about that. I don't mean to criticize CBS for their business acumen, or the major role they played in resurrecting the brand. Because they did play such a role.

But you can't pretend, and I mean this with all due respect to your experience and deep understanding in this area, that there wasn't a noticeable falling off in quality of the product from almost the end of WWII to the end of the 1980s. That's a long time to make and sell not-so-great pianos at top prices. Since it was bought back, the output has been uneven and not always comparable with 1- their best products during their best years, or 2- the best products of contemporary top-tier makers.

I agree both that there was a noticeable decline in build quality and performance during those years. I also agree that this was a long time to be selling pianos of rather poor build quality and performance at top prices. But the downward spiral started and accelerated under private, not public, ownership and management. The reversal of that decline didn’t take place immediately after the CBS buyout but it did slow down. I was in the factory not long after the buyout and observed some of the things CBS money was beginning to accomplish in the factory and it was quite a lot. Yes, quality was still declining but things were beginning to stabilize and there was hope that the light at the end of the tunnel might not be an oncoming train.

Piano building is a complex task involving a wide variety of knowledge and skills and infrastructure. I have never worked for Steinway but since those years I have worked for several other piano makers and I have observed that once a serious decline starts it’s hard to stop it, let alone turn it around. You don’t just call someone in and say, “Fix it.” It takes time just to fully assess the damage done by decades of neglect. And then it takes more time to develop and implement the actual process of fixing everything. Aside from the obvious challenges of getting a new management team in place and functioning smoothly, rebuilding a complete factory is not easy. Replacing worn out and obsolete machinery—at least some of which will be task-specific and has to be designed and built accordingly—can take years even with large budgets. Training new workers and instilling a new work ethic also does not occur overnight.

It is not all that unexpected that it took a decade for discernible results to become apparent in the finished product. The turnaround started with CBS but the results didn’t become obvious until sometime later. It’s been rather like the tanker at sea; the captain may order the ship to a full emergency stop but it’s going to take five kilometers for that to happen.

Please note that I don’t have investments in either CBS or Steinway (at least none that I’m aware of) but I well remember what I saw in the factory back then and much of it wasn’t very pretty. And today it seems neither fair nor accurate to blame CBS for damage done to the factory and the product through the mismanagement of others. I remain convinced that without the CBS buyout, CBS money and the changes CBS set in motion there would be no Steinway company today.

ddf
Posted by: Ed McMorrow, RPT

Re: Steinway Bought Out and Going Private - 07/04/13 10:50 PM

Apparently Anthony Gilroy's marketing expertise does not include current prices for used Steinway's. I just sold a like new rebuilt 1926 walnut M for $33K. Customer could easily have purchased new-but they know a good piano when they play/hear it-and they don't want to waste money.
Posted by: Norbert

Re: Steinway Bought Out and Going Private - 07/04/13 11:11 PM

Well, one thing for sure:

We're living in interesting times!

Norbert smile
Posted by: laguna_greg

Re: Steinway Bought Out and Going Private - 07/05/13 12:43 AM

Originally Posted By: ClsscLib
Originally Posted By: laguna_greg
Hi Class,

(can I write it that way?)...



I've certainly been called by worse names than that! Even "evil genius" once. They got that half right.


I long to be called an evil genius...
Posted by: laguna_greg

Re: Steinway Bought Out and Going Private - 07/05/13 12:48 AM

Originally Posted By: carey


And apparently the factual errors can be attributed to Anthony Gilroy, Steinway's Director of Marketing and Communication. crazy



Imagine that! Thank for proving my point for me, because people on the street actually believe those pronouncements.
Posted by: Del

Re: Steinway Bought Out and Going Private - 07/05/13 01:21 AM

Originally Posted By: laguna_greg
I long to be called an evil genius...

OK. You're an Evil Genius!

ddf
Posted by: Del

Re: Steinway Bought Out and Going Private - 07/05/13 01:28 AM

Originally Posted By: carey
... And apparently the factual errors can be attributed to Anthony Gilroy, Steinway's Director of Marketing and Communication. crazy

Many years back I read a sci-fi book that had something to do with time travel. On his way through time the protagonist would stop off in different eras to do his thing. One of the things that was a constant puzzle to him was why, in the eras that permitted such things as advertising, the populace would actually believe the things a company (or a politician) would say about themselves. That is still a good question.

ddf

PS. There is an interesting little piece on NPR's Morning Edition that is related, at least obliquely, to this issue. Go to:
http://www.npr.org/blogs/money/2013/07/0...ft=1&f=1001
Posted by: phacke

Re: Steinway Bought Out and Going Private - 07/05/13 02:28 AM

Originally Posted By: Numerian
Kohlberg is not buying Steinway for $438 million. They are valuing Steinway at $438 million, if everyone tenders their shares at $35/share. How much of its own and its investors money Kohlberg is putting into Steinway isn't clear, but in deals of this nature, it could be $100 million or less. ...

...

One other strange thing about this deal is, why now? If Steinway is so attractive as a private equity buyout, it would have been vastly more attractive three years ago when the stock was 70% cheaper. It's very easy to see why Steinway management climbed aboard this deal so fast. After watching their stock recover 70% in the market, for someone to come along and pay a 15% premium on top of that is almost too good to be true.


Hello M. Numerian,

Interesting post.

Regarding your first paragraph, in this buy-out, are you implying that shareholders have the option of holding on to their shares? This is not a likely scenario, but your statement seems to imply it. Another poster asked as well, educate us about what you mean here. I for one would be interested in more detail of the mechanics of the buyout you describe in your first paragraph.

Regarding your last paragraph
you wrote>One other strange thing about this deal is, why now?

This is easy. They didn't have money 3 years ago. For example, GE capital, a loan provider in this case, Warren Buffett had to bail GE out 4-5 years ago or so.
I was wondering about the thin atmosphere (oxygen tanks required), Annapurna-like valuations of LVB, bucking the market trend as of late. In hindsight, it is obvious. LVB was looking for suiters and the price reflected that fact -- insiders in the know drove the valuations up. Seen valuations go up like this before in analogous scenarios.

Best regards -
Posted by: Numerian

Re: Steinway Bought Out and Going Private - 07/05/13 06:19 AM

Hello phacke,

Yes, shareholders always have the option of holding on to their shares rather than tendering them to any proposed buyer of the company. You would do this if you thought a bidding war was going to develop and a second or even third buyer was going to pay more for your shares. This often happens if the first buyer is unwelcome and management has recommended rejecting their offer.

The buyers only have to get enough shares to gain legal control of the company and install their own board of directors. Often this is 50% plus one share, but some companies install "poison pills" into their by-laws that require a super majority for control. In lots of cases the company has often issued B shares to the public, and reserves A shares for a select few who are the only ones who get to vote at Annual Meetings for the board, etc. The A shares being privately held by individuals rather than mutual companies make it almost impossible for someone else to take over the company.

The Steinway situation is complicated because there is already a substantial minority shareholder who owns 30% to 40% of the shares. You can be assured Kohlberg talked to this party long before making a public offer, and has a private commitment to buy their shares. This is therefore virtually a done deal unless Kohlberg has no such understanding and the minority partner wants to bid for full control. Right now investors are waiting to hear from this company but once it is clear they support the deal, your only response can be to sell your shares to Kohlberg unless you want to keep a worthless piece of paper.

On the second point, it is true that three years ago these deals were much harder to do. They become more attractive when stock markets are rising and investors see even more rises ahead of them. Also, back then bank financing was very hard to get since credit standards were much tighter. Kohlberg could have done this deal but it would have taken a lot more of their own money. As it is, they just completed a new fund raising campaign among their investors, so now they have the cash for the down payment (some portion of the $438 million, maybe as low as $50 million), and they have the debt for the rest. Still, they are known for avoiding too much debt, so three years ago they could have gotten the company for 70% less. I wonder if they are kicking themselves because of that. You are right that LVB was shopping the company and that helped drive the price up, but Kohlberg would have been a likely buyer three years ago.

One possible answer might be that attractive leveraged buyout deals are hard to come by. An extraordinary number of one-time public companies in America are now owned by these private equity firms (Kohlberg, KKR, Bain Capital, Goldman Sachs equity fund, Carlyle, etc.). Companies are being traded like baseball cards these days, and the fund owners don't really have a long term interest in the companies, their products, or their communities. Congress has begun to question these deals and a lot of the best prospects have been snapped up already. Kohlberg has to put its money to use or return it to its investors, so they may have felt pressured internally to do something. This might have been an easier decision if the minority shareholder bought into the deal already, which makes it harder for the employees (some of whom I think are unionized) to make a stink like the Hostess Bakeries union did. These private equity companies hate publicity good or bad and prefer to work in the shadows, so ideally for Kohlberg the Steinway deal will get done quickly and disappear from the press soon.
Posted by: laguna_greg

Re: Steinway Bought Out and Going Private - 07/05/13 10:02 AM

Originally Posted By: Del
Originally Posted By: laguna_greg
I long to be called an evil genius...

OK. You're an Evil Genius!

ddf


Thanks Del! I feel SO much better about myself!
Posted by: laguna_greg

Re: Steinway Bought Out and Going Private - 07/05/13 10:24 AM

Hi Numerian,

"These private equity companies hate publicity good or bad and prefer to work in the shadows, so ideally for Kohlberg the Steinway deal will get done quickly and disappear from the press soon."

Of course, the Steinway sale is a blip in the firmament of newsworthy items across the globe this week. Nobody's really looking at this, or caring about the outcome. It all appears above-board, perfectly legitimate and business-as-usual.

And Kohlberg's PR campaign has been carefully orchestrated to make sure it looks that way. Like all such deals, it would not do for the public to react the way I have been, for example, on the early parts of this thread. They've spent good money to avoid this very thing, and they have endless experience shaping public opinion.
Posted by: Withindale

Re: Steinway Bought Out and Going Private - 07/05/13 10:52 AM

Everybody

Would you advise the new Steinway management to retain the band instruments, or divest?
Posted by: ClsscLib

Re: Steinway Bought Out and Going Private - 07/05/13 11:24 AM

Originally Posted By: Withindale
Everybody

Would you advise the new Steinway management to retain the band instruments, or divest?


Without seeing the financials, it's impossible to say.

That aside, the other question is whether the non-piano business lines contribute any profitable synergy to the overall operation. I have my doubts, but I certainly could be wrong about that.
Posted by: laguna_greg

Re: Steinway Bought Out and Going Private - 07/05/13 11:25 AM

Hi With,

It depends on just how much cash flow the instrument division brings to the balance sheet. If it's a lot, they probably can't afford to get rid of it even if they want to.

I don't know anything specific about the company finances, but I imagine that band instruments actually bring in more than pianos, and with more consistency. But I'm just guessing.
Posted by: Withindale

Re: Steinway Bought Out and Going Private - 07/05/13 01:02 PM

Originally Posted By: ClsscLib
Originally Posted By: Withindale
Would you advise the new Steinway management to retain the band instruments, or divest?
... the other question is whether the non-piano business lines contribute any profitable synergy to the overall operation. I have my doubts, but I certainly could be wrong about that.

Precisely, why I asked.

The 2012 report says:
Band: sales $137m gross profit $35m
Piano: sales $217m gross profit $80m
S&S grand pianos shipped: 2,001
Overall operating expenses: $86m
Net income: $13.5m

The Kohlberg model is install new management to improve processes and cut costs, then increase sales.

I bet they are looking at those $86m operating expenses.
Posted by: laguna_greg

Re: Steinway Bought Out and Going Private - 07/05/13 04:29 PM

I said it before, this cannot end well.
Posted by: Rank Piano Amateur

Re: Steinway Bought Out and Going Private - 07/05/13 04:52 PM

Didn't the financial picture change a whole lot recently with the sale of Steinway Hall? It must have turned the company into a cash rich one. It is my uneducated belief that purchasers of corporate assets like companies with a lot of cash on hand.
Posted by: JimF

Re: Steinway Bought Out and Going Private - 07/05/13 05:03 PM

Originally Posted By: Withindale
Everybody

Would you advise the new Steinway management to retain the band instruments, or divest?


I don't know the specific answer to your question, but I did spend some time going through Steinway's SEC filings for last year, especially the balance sheet and all the footnotes. I was seaching for pockets of unrealized value or anything else that the Sharks would have looked for.

A few items.

1.As was noted, Steinway Hall property was sold recently. This operation had been a drag on profits (going from memory, but minus $4-5 mil/yr. sticks in my head). Its sale immediately removes that drag, plus my recollection is they used the proceeds to pay down just about all of their existing debt.

2. Annual operating profit has been running in the range of $30 mil per year. Without the above losses that will improve. It looks to me like this level of ongoing profitability could easily support $300+ mil of debt at current junk rates.

3. There are some interesting footnotes related to the band instrument division. Most interesting was that they have turned some kind of corner in China and now expect that operation to a)continue its profitability and b) be self-funding for growth. Therefore they are repatriating $15 mil of previously accumulated chinese profit that they no longer think will be needed to fund operations or growth initiatives. My guess is things are going very well for them in China. It would not surprise me if Kolhberg's plan has China at its center, as that's a potential hotbutton that could be used to exite the next buyer.

There may be an angle with previously written down unused tax-loss carry forwards that could be brought back onto the balance sheet with a new owning entity (either Kohlberg or the next buyer). I didn't go back to look at past k-1's for additional detail since I don't really feel competent to analyse this particular issue.

I have no idea what the Kolhberg people really have in mind, so this is all speculative.
Posted by: R_B

Re: Steinway Bought Out and Going Private - 07/05/13 05:30 PM

Originally Posted By: ClsscLib
Originally Posted By: R_B


...Materials + value add + profit = price....



Not really. Price equals what the buyer is willing to pay to a seller willing to sell.

Period.


I probably should have written "ASKING price" or "LIST price".

No matter, those are the basic variables and if profit is insufficient then the cost structure gets messed with (-:

I remember a presentation from a along time ago when we were setting up for a new product introduction.
A manufacturing engineer put this little equation up on the overhead slide projector;
ORDERS - PRODUCTION = BACK-LOG
Which pleased us all, we WANTED back-log.

His next slide was;
PRODUCTION - ORDERS = SCRAP

His POINT was that he wasn't going to invest in over capacity.
We appreciated that excess capacity leads to "fire sales", heavy discounting and basically a devaluation of the product.

The NEXT generation of product suffers a hangover from all that, i.e. sales are withheld in anticipation of the discounting, but you can't afford to do that every time, or even a second time, so don't get into it a first time.
Posted by: AJB

Re: Steinway Bought Out and Going Private - 07/05/13 08:32 PM

I am very much inclined to agree with Numerian's analysis of the likely sale economics.

Steinway will be flipped before long.

My wider perspective is "why does anyone care?" The future of Steinway matters only to future buyers (and some dealers). Steinway is unlikely to disappear and quality will improve, remain the same or worsen. For current owners this is a "so what" point and for future owners there are plenty of other choices.

The ownership of a company matters little to consumers. The company is also trivial in US economic terms. In Europe the brand is regarded as German and it would not surprise me to see the European entity being spun off.
Posted by: Ed McMorrow, RPT

Re: Steinway Bought Out and Going Private - 07/05/13 09:02 PM

AJB,
Interesting the "Teutonic" chauvinism. Steinway would probably never have come into being if they didn't start the modern grand design in the USA. The Continental markets were still structured at the city state level in the mid 1800's. The economy of scale was not available there to support the capital investments needed to reduce per unit costs and improve quality. At that point in time the USA was the fastest growing and largest unified market in the world.

I have always found the use of debt to purchase business's problematic. It seems contrary to true market valuation that credit is granted to the entity being sold for the benefit of the purchaser. Couple this with the money supply being debt linked and you have a recipe for asset bubbles.

I have long thought why don't we expand the money supply in proportion to profits. And this would be direct profits-not profits from leveraged asset trading.

But what do I know-I just fix pianos!
Posted by: ClsscLib

Re: Steinway Bought Out and Going Private - 07/05/13 10:31 PM

Originally Posted By: Ed McMorrow, RPT
AJB,

...I have always found the use of debt to purchase business's problematic. It seems contrary to true market valuation that credit is granted to the entity being sold for the benefit of the purchaser.



Have you ever gotten a mortgage to buy a home? That's a grant of credit against the collateral of the item being sold (the home) for the benefit of the purchaser (you).
Posted by: phacke

Re: Steinway Bought Out and Going Private - 07/06/13 12:44 AM

M. Numerian, Thanks for your discussion and explanations.

M. JimF, Thanks for your 'glass half full' perspective. Just because 'I don't see the good' (per above) does not mean I think it must turn out very bad. Instead of the 58th St. Steinway Hall they just sold, they can just rent a U-haul filled with a few candidate pianos, park it in the lot of Lincoln Center or in front of Carnegie Hall and have the pianists select in the back of the truck. Just kidding, they may rent some nice space.

Best regards-
Posted by: Radio.Octave

Re: Steinway Bought Out and Going Private - 07/06/13 01:09 AM

Unfortunately, there are only so many places (colleges, concert halls) that can afford Steinway's exorbitant prices. In today's economy, how many people can really afford near six-figure pianos? Steinways are great, but there are many other manufacturers that provide much more "bang for your buck." Those are the companies that will survive, instead of being sold off to the highest bidder. RIP, Steinway & Sons.
Posted by: phacke

Re: Steinway Bought Out and Going Private - 07/06/13 01:18 AM

Originally Posted By: AJB
I am very much inclined to agree with Numerian's analysis of the likely sale economics.

Steinway will be flipped before long.

My wider perspective is "why does anyone care?" The future of Steinway matters only to future buyers (and some dealers). Steinway is unlikely to disappear and quality will improve, remain the same or worsen. For current owners this is a "so what" point and for future owners there are plenty of other choices.

The ownership of a company matters little to consumers. The company is also trivial in US economic terms. In Europe the brand is regarded as German and it would not surprise me to see the European entity being spun off.


Hello AJB -
One perspective (of several I can think of) is that the quality getting worst means the brand not commanding the same respect, which means the market value of the piano you (AJB, an S&S) own eventually going down. There are plenty of arguably equally great piano's from the '20s here that are worth maintaining and restoring, but are not, because the value of the brand has not been sustained.

Best regards -
Posted by: Ed McMorrow, RPT

Re: Steinway Bought Out and Going Private - 07/06/13 01:32 AM

People have to live somewhere, that cost's money, either servicing debt or paying rent. So there is a difference between investing and spending. No one has to invest.

Purchasing a business by using the credit worthiness of the purchased entity, (leveraged buyout), to then grant dividends to the new owners is not an efficient use of capital. The creation of great new wealth has always been new businesses supplanting old ones.

Expanding the money supply in response to debt instead of profits rewards leveraging of existing assets. This disrupts equity valuation based on profits and prospects for future increases in them. This undermines rational equity values being created by a stock market. Now we have over half the equity trading being executed by robots-it still takes a human to write the trading algorithms-but that cannot be done at anything like the speed of robot trading.
Posted by: Numerian

Re: Steinway Bought Out and Going Private - 07/06/13 07:53 AM

That's an excellent and concise critique of today's capital markets. Old timers in the leveraged buyout business have gone public with their criticism of the way business is being conducted these days. The investors are not necessarily more or less greedy than in the past, but they are greedy way too early. People don't wait three to five years for their large payout. There are two many cases where six months into the deal the new owner arranges for more debt to be taken on, and then simultaneously declares for themselves a huge dividend payment equal to the amount of the debt proceeds. This is why in 2007 - 2008 there were so many private equity guys "making" $500 million a year from their business. Nobody makes that sort of money in salary, wages, or even as an investor given today's low interest rates and mediocre performance on most investments. But you can make that sort of money through equity extraction - raiding a company's pension plan, or playing games by forcing the company to borrow so you can declare yourself a dividend. As you say, this isn't capitalism because it is certainly not an efficient use of capital.

I suspect Jerome Kohlberg is from the old school and might agree with this criticism. Also, the 57th street property was a classic example of an underutilized asset in the leveraged buyout business. They would have looked at Steinway's insistence on keeping that property as a showroom as nothing but sentimentality, so one key element of a buyout is to force management to get over their sentimentality, dump the showroom, and monetize the asset. In LBO speak, that would be a legitimate cause for then declaring a gigantic dividend for the new owners. A critic could not exactly say this is an efficient use of capital; after all, a shiny new 60 story mixed use condo has now been built in Midtown on prime property. The way in which it is sometimes done, in which disinterested parties force a takeover of the company and pocket the profits from the deal, could at least be described as buccaneer capitalism. In this case, existing management at Steinway seemed to decide either they monetize the property and pocket the profits, or some third party was going to take over the company and take the profit for themselves. Selling Steinway Hall became inevitable once that was set in motion.
Posted by: Steve Cohen

Re: Steinway Bought Out and Going Private - 07/06/13 09:19 AM

Originally Posted By: Radio.Octave
Unfortunately, there are only so many places (colleges, concert halls) that can afford Steinway's exorbitant prices. In today's economy, how many people can really afford near six-figure pianos? Steinways are great, but there are many other manufacturers that provide much more "bang for your buck." Those are the companies that will survive, instead of being sold off to the highest bidder. RIP, Steinway & Sons.


Steinway's sales in to institutions is strong, even in this challenging economy. Also, you base your conclusion on sales of Steinway & Sons pianos, leaving out Boston, Essex, and band instruments - all significant contributors to Steinway's income stream.

You ask "...how many people can really afford near six-figure pianos?" Steinway makes only about 4000 pianos per year. There is a huge pool of potential buyers.
Posted by: JimF

Re: Steinway Bought Out and Going Private - 07/06/13 10:09 AM

Phacke,

I was surprised you characterized my perspective as "glass half full," although I can see how it might read that way.

Truth is, I don't think being LBO'ed is good for the long term health of any business. The LOB crowd does not create value...they just syphon off everything the business has created. Since the value removed is no longer available to maintain the business or support its future growth, the endgame is either it's demise or the injection of new (replacement) capital when it is flipped to the next owners.
Posted by: Hakki

Re: Steinway Bought Out and Going Private - 07/06/13 10:35 AM

Steinway Hall SOLD !!!

Are they talking about this hall ?
Posted by: Steve Cohen

Re: Steinway Bought Out and Going Private - 07/06/13 10:42 AM

Originally Posted By: Hakki
Steinway Hall SOLD !!!

Are they talking about this hall ?



That's the one.
Posted by: Hakki

Re: Steinway Bought Out and Going Private - 07/06/13 11:37 AM

Originally Posted By: Steve Cohen
Originally Posted By: Hakki
Steinway Hall SOLD !!!

Are they talking about this hall ?



That's the one.


Shame on them, then mad
Posted by: Norbert

Re: Steinway Bought Out and Going Private - 07/06/13 11:41 AM

Quote:
management to get over their sentimentality,


From an American point of view, this perhaps makes sense.
There are exceptions but not many [left]

From a European view, this is [almost] unthinkable.

When talking to people like Ulrich Sauter, Udo Steingraeber, the Bluethners and even relative newcomers like Paolo Fazioli and Dr.Laul, the "sentimentality" of following their own genius or a long national tradition including that of their own forefathers' is a real one.

It is exactly what motivates them from day to day to do honor and live up to the task. It's something that goes without saying.

It gives their products a certain "authenticity" that is still being appreciated by many in today's market.

It's not just another "asset" that's up for sale - never will.

I'm not an economist but at least to me this makes for a promising, reliable and more "predictable" future overall.

Having grown up in post-war Germany whose economy was 90% shattered, I've seen it work with literally 10,000's of small family owned firms specializing in smaller production, high quality type products.

So, I may be somewhat prejudiced.

Let's see how this one will play out.

Norbert
Posted by: ClsscLib

Re: Steinway Bought Out and Going Private - 07/06/13 12:06 PM

Originally Posted By: Hakki
Originally Posted By: Steve Cohen
Originally Posted By: Hakki
Steinway Hall SOLD !!!

Are they talking about this hall ?



That's the one.


Shame on them, then mad


You should have bought it yourself. Then, as the owner, you'd have been free to keep it as a piano museum or do anything else with it that you wanted.
Posted by: Hakki

Re: Steinway Bought Out and Going Private - 07/06/13 12:37 PM

Originally Posted By: Norbert
Quote:
management to get over their sentimentality,


From an American point of view, this perhaps makes sense.
There are exceptions but not many [left]

From a European view, this is [almost] unthinkable.

When talking to people like Ulrich Sauter, Udo Steingraeber, the Bluethners and even relative newcomers like Paolo Fazioli and Dr.Laul, the "sentimentality" of following their own genius or a long national tradition including that of their own forefathers' is a real one.

It is exactly what motivates them from day to day to do honor and live up to the task. It's something that goes without saying.

It gives their products a certain "authenticity" that is still being appreciated by many in today's market.

It's not just another "asset" that's up for sale - never will.

I'm not an economist but at least to me this makes for a promising, reliable and more "predictable" future overall.

Having grown up in post-war Germany whose economy was 90% shattered, I've seen it work with literally 10,000's of small family owned firms specializing in smaller production, high quality type products.

So, I may be somewhat prejudiced.

Let's see how this one will play out.

Norbert


Bravo !

No you are not prejudiced. All you say is very correct.

This is something today's modern New Yorkers will never appreciate. Money, money, money... That is what they worship.

Posted by: Rank Piano Amateur

Re: Steinway Bought Out and Going Private - 07/06/13 12:49 PM

Hey Norbert, how come you left the Burgetts off your list? Surely they rank up there with Dr. Laul.

I guess I do not need really to ask why you omitted them, having reviewed the list of brands you sell. . . . You probably have not had the chance to talk with them. They are incredible, and devoted to their brand and to the goal of keeping North American piano manufacturing alive.

I guess we will have to wait and see what happens with Steinway. But that was always true. Mason and Hamlin might end up the only North American-made piano. I would not like to see that happen, I have to say--Steinway could become great again. And our continent needs to keep up its glorious piano traditions. I do think the Burgetts are doing a great job, but it would be nice to keep Steinway here too.
Posted by: Minnesota Marty

Re: Steinway Bought Out and Going Private - 07/06/13 01:00 PM

What about Walter Pianos?
Posted by: Steve Cohen

Re: Steinway Bought Out and Going Private - 07/06/13 01:10 PM

Originally Posted By: Norbert
Quote:
management to get over their sentimentality,


From an American point of view, this perhaps makes sense.
There are exceptions but not many [left]

From a European view, this is [almost] unthinkable.

When talking to people like Ulrich Sauter, Udo Steingraeber, the Bluethners and even relative newcomers like Paolo Fazioli and Dr.Laul, the "sentimentality" of following their own genius or a long national tradition including that of their own forefathers' is a real one.

It is exactly what motivates them from day to day to do honor and live up to the task. It's something that goes without saying.

It gives their products a certain "authenticity" that is still being appreciated by many in today's market.

It's not just another "asset" that's up for sale - never will.

I'm not an economist but at least to me this makes for a promising, reliable and more "predictable" future overall.

Having grown up in post-war Germany whose economy was 90% shattered, I've seen it work with literally 10,000's of small family owned firms specializing in smaller production, high quality type products.

So, I may be somewhat prejudiced.

Let's see how this one will play out.

Norbert


I agree. The difference in point-of-view between the European piano industry owners and that of Steinway couldn't be more different.

Mason & Hamlin and Walters are philosophically closer to the Europeans that to Steinway.

[I am not a dealer for, nor a consultant to any of the companies mentioned in this thread.]
Posted by: Bob Newbie

Re: Steinway Bought Out and Going Private - 07/06/13 02:54 PM

I'm going to do a "Karnack" the magnificent prediction. All pre buyout Steinway piano prices
will skyrocket(and used ones too!) ... smile
Posted by: SBP

Re: Steinway Bought Out and Going Private - 07/06/13 04:46 PM

So, in the midst of all this doom and gloom speculation, are there any official statements on what's going to happen?
Posted by: mahermusic

Re: Steinway Bought Out and Going Private - 07/06/13 06:16 PM

Originally Posted By: Rank Piano Amateur
Mason and Hamlin might end up the only North American-made piano.


...cough, cough... WALTER!!!!!... cough, cough.....
Posted by: Norbert

Re: Steinway Bought Out and Going Private - 07/06/13 08:00 PM

Quote:

This is something today's modern New Yorkers will never appreciate. Money, money, money... That is what they worship.


Don't know about New Yorkers.

But those money worshipppers will have a harder time to do so when there's none left.

But then I can't really tell what people do in this economy..

Norbert frown
Posted by: SBP

Re: Steinway Bought Out and Going Private - 07/06/13 08:31 PM

Originally Posted By: mahermusic
Originally Posted By: Rank Piano Amateur
Mason and Hamlin might end up the only North American-made piano.


...cough, cough... WALTER!!!!!... cough, cough.....


cough*cough*Ravencroft*cough*cough

Somehow, with all this talk about money grubbing banksters, I feel the need to apologize for the fact that my dad works for a certain big financial company whistle
Posted by: ClsscLib

Re: Steinway Bought Out and Going Private - 07/06/13 09:29 PM

Originally Posted By: SBP
Originally Posted By: mahermusic
Originally Posted By: Rank Piano Amateur
Mason and Hamlin might end up the only North American-made piano.


...cough, cough... WALTER!!!!!... cough, cough.....


cough*cough*Ravencroft*cough*cough

Somehow, with all this talk about money grubbing banksters, I feel the need to apologize for the fact that my dad works for a certain big financial company whistle


So he's a criminal?
Posted by: carey

Re: Steinway Bought Out and Going Private - 07/06/13 09:52 PM

Originally Posted By: SBP
Originally Posted By: mahermusic
Originally Posted By: Rank Piano Amateur
Mason and Hamlin might end up the only North American-made piano.


...cough, cough... WALTER!!!!!... cough, cough.....


cough*cough*Ravencroft*cough*cough


True - but (per Larry Fine) "Currently, only four to six [Ravenscroft] pianos are produced yearly, with pricing beginning at $230,000 for a model 220, and up to $550,000 for a model 275 with "all the extras," including titanium string terminations, exotic veneers, intarsia, artwork, and inlays of precious stones." Probably wonderful instruments, but hardly an option for the vast majority of piano buyers......

and what about Astin-Weight?? *cough, cough* grin
Posted by: Rank Piano Amateur

Re: Steinway Bought Out and Going Private - 07/06/13 10:23 PM

Sorry for my omissions. This thread is a terrific reminder that there are great American made pianos out there!
Posted by: carey

Re: Steinway Bought Out and Going Private - 07/06/13 10:57 PM

Originally Posted By: Rank Piano Amateur
Sorry for my omissions. This thread is a terrific reminder that there are great American made pianos out there!


But just not enough of them !! smokin
Posted by: Radio.Octave

Re: Steinway Bought Out and Going Private - 07/06/13 11:00 PM

Originally Posted By: Steve Cohen
Originally Posted By: Radio.Octave
Unfortunately, there are only so many places (colleges, concert halls) that can afford Steinway's exorbitant prices. In today's economy, how many people can really afford near six-figure pianos? Steinways are great, but there are many other manufacturers that provide much more "bang for your buck." Those are the companies that will survive, instead of being sold off to the highest bidder. RIP, Steinway & Sons.


Steinway's sales in to institutions is strong, even in this challenging economy. Also, you base your conclusion on sales of Steinway & Sons pianos, leaving out Boston, Essex, and band instruments - all significant contributors to Steinway's income stream.

You ask "...how many people can really afford near six-figure pianos?" Steinway makes only about 4000 pianos per year. There is a huge pool of potential buyers.


I don't know much about the other brands, but Bostons are overpriced for what they are. IMO, so are Steinways (not everyone will agree). Many people/institutions buy Steinway based on the name alone. Now that Steinway "sold out" I'd be surprised if the quality stays the same. The Steinway name won't carry as much heft as it used to. In the age of digital pianos, the acoustic piano makers that survive will be the ones who can make a quality piano at an affordable price.

Posted by: Steve Cohen

Re: Steinway Bought Out and Going Private - 07/07/13 09:24 AM

Originally Posted By: carey
Originally Posted By: Rank Piano Amateur
Sorry for my omissions. This thread is a terrific reminder that there are great American made pianos out there!


But just not enough of them !! smokin


There may be another one coming soon.
Posted by: Minnesota Marty

Re: Steinway Bought Out and Going Private - 07/07/13 09:37 AM

Originally Posted By: Steve Cohen
Originally Posted By: carey
But just not enough of them !

There may be another one coming soon.

Steve - That's just too much of a teaser to not beg for some inside info! You gotta tell us more or face the throngs of crazed villagers rampaging with torches.
Posted by: ClsscLib

Re: Steinway Bought Out and Going Private - 07/07/13 09:58 AM

Originally Posted By: Radio.Octave
Originally Posted By: Steve Cohen
Originally Posted By: Radio.Octave
Unfortunately, there are only so many places (colleges, concert halls) that can afford Steinway's exorbitant prices. In today's economy, how many people can really afford near six-figure pianos? Steinways are great, but there are many other manufacturers that provide much more "bang for your buck." Those are the companies that will survive, instead of being sold off to the highest bidder. RIP, Steinway & Sons.


Steinway's sales in to institutions is strong, even in this challenging economy. Also, you base your conclusion on sales of Steinway & Sons pianos, leaving out Boston, Essex, and band instruments - all significant contributors to Steinway's income stream.

You ask "...how many people can really afford near six-figure pianos?" Steinway makes only about 4000 pianos per year. There is a huge pool of potential buyers.


I don't know much about the other brands, but Bostons are overpriced for what they are. IMO, so are Steinways (not everyone will agree). Many people/institutions buy Steinway based on the name alone. Now that Steinway "sold out" I'd be surprised if the quality stays the same. The Steinway name won't carry as much heft as it used to. In the age of digital pianos, the acoustic piano makers that survive will be the ones who can make a quality piano at an affordable price.



Steinway didn't just suddenly "sell out." It's been a public company for years, and when a company is public, it must respond to the wishes of its many shareholders.

As for the suggestion that the only makers to survive will be those that make "a quality piano at an affordable price," a couple of points:

If by "survive," you mean, "sell many thousands of pianos," we're already there. The largest volume auto sellers are going to be Toyota, Hyundai,and Tata Motors, and the largest volume piano sellers are going to be Yamaha, Kawai, and one or more of the Chinese makers. Corollas are great if you want a Corolla or if that's the most expensive car you can afford.

In the meantime, I hear that a number of the top tier makers are producing all the pianos they can comfortably produce. They're going to survive precisely because enough buyers to keep them productively busy know the difference between a Hyundai and a Ferrari and would prefer a Ferrari, thank you very much.

Whether Steinway continues to occupy the market niche it now occupies will be entirely up to Steinway's new owners. My own guess is that they're looking to burnish and monetize an already valuable prestige brand name, and you can't meet that goal if product performance slips.

No one will buy a Ferrari (at a customary Ferrari price) that performs like a Hyundai. But enough are willing to buy cars that perform at or above Ferrari's current performance standards.
Posted by: Jonathan Alford

Re: Steinway Bought Out and Going Private - 07/07/13 10:54 AM

Originally Posted By: ClsscLib

No one will buy a Ferrari (at a customary Ferrari price) that performs like a Hyundai. But enough are willing to buy cars that perform at or above Ferrari's current performance standards.


Moving back to pianos - Steinway specifically, I agree, with one important qualifier - How many buyers can determine if the "Ferrari" they are looking to purchase performs like a "Hyundai?"

Jonathan
Posted by: ClsscLib

Re: Steinway Bought Out and Going Private - 07/07/13 11:17 AM

Originally Posted By: Jonathan Alford
Originally Posted By: ClsscLib

No one will buy a Ferrari (at a customary Ferrari price) that performs like a Hyundai. But enough are willing to buy cars that perform at or above Ferrari's current performance standards.


Moving back to pianos - Steinway specifically, I agree, with one important qualifier - How many buyers can determine if the "Ferrari" they are looking to purchase performs like a "Hyundai?"

Jonathan


Some, though surely not all. Same is true for car buyers.
Posted by: Withindale

Re: Steinway Bought Out and Going Private - 07/07/13 01:20 PM

Originally Posted By: ClsscLib

Whether Steinway continues to occupy the market niche it now occupies will be entirely up to Steinway's new owners. My own guess is that they're looking to burnish and monetize an already valuable prestige brand name, and you can't meet that goal if product performance slips.

+1

Posted by: BerndAB

Re: Steinway Bought Out and Going Private - 07/07/13 03:55 PM

Originally Posted By: Steve Cohen
Originally Posted By: carey
Originally Posted By: Rank Piano Amateur
Sorry for my omissions. This thread is a terrific reminder that there are great American made pianos out there!


But just not enough of them !! smokin


There may be another one coming soon.


Maybe with Steve/Stephen also in his name? Family name starting with a "p"...?... wink

Building straight strung concert grands, the first after Erard, Pleyel and 1900? Actually residing in the nice Loire valley in France, God's Own Garden On Earth...?...
Posted by: BerndAB

OT - car analogies... - 07/07/13 04:08 PM

Originally Posted By: ClsscLib
Originally Posted By: Jonathan Alford
Moving back to pianos - Steinway specifically, I agree, with one important qualifier - How many buyers can determine if the "Ferrari" they are looking to purchase performs like a "Hyundai?"

Jonathan


Some, though surely not all. Same is true for car buyers.


If a Daewoo (Korean) car shall perform and be regarded as a "Chevrolet"..?.. Lousy General Motors tricksters and mobsters. Lousy american business behaviour to fault, to trick and to cheat the customers.

..the name for these procedures? "Marketing". Ethics and Moral categories don't apply and matter any longer. The DEAL You ought to have to close. Nothing else matters. To increase the capital turnover profits. The trial is: to earn big money - by spending little money. The qualification is named "Master of Business Administration".
Posted by: ClsscLib

Re: OT - car analogies... - 07/07/13 05:33 PM

Someone is having a bad hair day.
Posted by: Rank Piano Amateur

Re: OT - car analogies... - 07/07/13 05:45 PM

BerndAB: given that 40% of Steinway belongs to a non-American company, your criticism seems a bit unfounded at least in this case. As was pointed out earlier on this thread, the transaction must have been okayed by this entity.
Posted by: Ed McMorrow, RPT

Re: OT - car analogies... - 07/07/13 06:03 PM

BerndAD,
I share your frustration with the MBA class. MBA schools study business cases much like law students study law cases, this is where they learn to create many separate balance sheets for the same operation including putting some liabilities "off balance sheet". If I was audited by the IRS and I showed them several sets of books for my business transactions-they would prosecute me for tax fraud. But somehow this magically become OK when it is a corporate entity.

Some of these MBA schools are in state operated educational institutions. I wonder if we shouldn't be looking at this as a form of "State sponsored economic terrorism"!

To those posters who worry that Steinway is run by a bunch of noveau riche troglodytes who have no esthetic sensibilities and lack the ability to appreciate sharp chisels and well-seasoned wood-I have met several principals over the recent years and they all seem very skilled at running the company. Current management and ownership must have sought Kohlberg out-but this is speculation on my part.

Now is the opportunity for someone with a spare $500 million or so who wants to build Steinways to put in their bid. That leaves me out!
Posted by: BerndAB

Re: OT - car analogies... - 07/07/13 07:21 PM

Originally Posted By: Ed McMorrow, RPT
Some of these MBA schools are in state operated educational institutions. I wonder if we shouldn't be looking at this as a form of "State sponsored economic terrorism"!


+1

I didn’t say one single word for or against any people involved in the Steinway management or momentary ownership like Mr Kim. I distrust the financial people from Wall Street, from Francfort et cetera. And I distrust the MBA education in Germany because of the lack of ethics, I’ve seen a lot of young ethos-free MBA people acting in big companies...

I am an engineer, specialist in machinery and gearbox fabrication, CNC and CAD technology. For me to earn money involves to produce goods and the knowledge to do so, to distribute them and to deliver them to customers, that’s real economy and honest work.

The other “economy" (try to generate financial profits from finances only..) is Voodoo economics for me.

Money itself doesn’t generate real value. It always needs men, human work and intelligence in handling real goods and information regarding goods and manufacturing processes.

If money alone "generates" money, then this profit money is the loss at other men.
Posted by: Radio.Octave

Re: Steinway Bought Out and Going Private - 07/07/13 09:27 PM

Originally Posted By: ClsscLib
Originally Posted By: Radio.Octave
Originally Posted By: Steve Cohen
Originally Posted By: Radio.Octave
Unfortunately, there are only so many places (colleges, concert halls) that can afford Steinway's exorbitant prices. In today's economy, how many people can really afford near six-figure pianos? Steinways are great, but there are many other manufacturers that provide much more "bang for your buck." Those are the companies that will survive, instead of being sold off to the highest bidder. RIP, Steinway & Sons.


Steinway's sales in to institutions is strong, even in this challenging economy. Also, you base your conclusion on sales of Steinway & Sons pianos, leaving out Boston, Essex, and band instruments - all significant contributors to Steinway's income stream.

You ask "...how many people can really afford near six-figure pianos?" Steinway makes only about 4000 pianos per year. There is a huge pool of potential buyers.


I don't know much about the other brands, but Bostons are overpriced for what they are. IMO, so are Steinways (not everyone will agree). Many people/institutions buy Steinway based on the name alone. Now that Steinway "sold out" I'd be surprised if the quality stays the same. The Steinway name won't carry as much heft as it used to. In the age of digital pianos, the acoustic piano makers that survive will be the ones who can make a quality piano at an affordable price.



Steinway didn't just suddenly "sell out." It's been a public company for years, and when a company is public, it must respond to the wishes of its many shareholders.

As for the suggestion that the only makers to survive will be those that make "a quality piano at an affordable price," a couple of points:

If by "survive," you mean, "sell many thousands of pianos," we're already there. The largest volume auto sellers are going to be Toyota, Hyundai,and Tata Motors, and the largest volume piano sellers are going to be Yamaha, Kawai, and one or more of the Chinese makers. Corollas are great if you want a Corolla or if that's the most expensive car you can afford.

In the meantime, I hear that a number of the top tier makers are producing all the pianos they can comfortably produce. They're going to survive precisely because enough buyers to keep them productively busy know the difference between a Hyundai and a Ferrari and would prefer a Ferrari, thank you very much.

Whether Steinway continues to occupy the market niche it now occupies will be entirely up to Steinway's new owners. My own guess is that they're looking to burnish and monetize an already valuable prestige brand name, and you can't meet that goal if product performance slips.

No one will buy a Ferrari (at a customary Ferrari price) that performs like a Hyundai. But enough are willing to buy cars that perform at or above Ferrari's current performance standards.


Steinways are hardly Ferraris. They are more like a Lexus, which is in essence, and overpriced Toyota. I know all the Steinway snobs will get their panties in a bunch over this, but oh well. Steinways are overrated.
Posted by: ClsscLib

Re: Steinway Bought Out and Going Private - 07/07/13 10:27 PM

Originally Posted By: Radio.Octave
Originally Posted By: ClsscLib
Originally Posted By: Radio.Octave
Originally Posted By: Steve Cohen
Originally Posted By: Radio.Octave
Unfortunately, there are only so many places (colleges, concert halls) that can afford Steinway's exorbitant prices. In today's economy, how many people can really afford near six-figure pianos? Steinways are great, but there are many other manufacturers that provide much more "bang for your buck." Those are the companies that will survive, instead of being sold off to the highest bidder. RIP, Steinway & Sons.


Steinway's sales in to institutions is strong, even in this challenging economy. Also, you base your conclusion on sales of Steinway & Sons pianos, leaving out Boston, Essex, and band instruments - all significant contributors to Steinway's income stream.

You ask "...how many people can really afford near six-figure pianos?" Steinway makes only about 4000 pianos per year. There is a huge pool of potential buyers.


I don't know much about the other brands, but Bostons are overpriced for what they are. IMO, so are Steinways (not everyone will agree). Many people/institutions buy Steinway based on the name alone. Now that Steinway "sold out" I'd be surprised if the quality stays the same. The Steinway name won't carry as much heft as it used to. In the age of digital pianos, the acoustic piano makers that survive will be the ones who can make a quality piano at an affordable price.



Steinway didn't just suddenly "sell out." It's been a public company for years, and when a company is public, it must respond to the wishes of its many shareholders.

As for the suggestion that the only makers to survive will be those that make "a quality piano at an affordable price," a couple of points:

If by "survive," you mean, "sell many thousands of pianos," we're already there. The largest volume auto sellers are going to be Toyota, Hyundai,and Tata Motors, and the largest volume piano sellers are going to be Yamaha, Kawai, and one or more of the Chinese makers. Corollas are great if you want a Corolla or if that's the most expensive car you can afford.

In the meantime, I hear that a number of the top tier makers are producing all the pianos they can comfortably produce. They're going to survive precisely because enough buyers to keep them productively busy know the difference between a Hyundai and a Ferrari and would prefer a Ferrari, thank you very much.

Whether Steinway continues to occupy the market niche it now occupies will be entirely up to Steinway's new owners. My own guess is that they're looking to burnish and monetize an already valuable prestige brand name, and you can't meet that goal if product performance slips.

No one will buy a Ferrari (at a customary Ferrari price) that performs like a Hyundai. But enough are willing to buy cars that perform at or above Ferrari's current performance standards.


Steinways are hardly Ferraris. They are more like a Lexus, which is in essence, and overpriced Toyota. I know all the Steinway snobs will get their panties in a bunch over this, but oh well. Steinways are overrated.


I drive a Toyota and have done so for years. To me, a Lexus is a much finer car. More than I ask for in a car, so it's irrelevant to me, but the distinction is pretty clear.
Posted by: LJC

Re: Steinway Bought Out and Going Private - 07/08/13 10:15 AM

"Steinways are hardly Ferraris. They are more like a Lexus, which is in essence, and overpriced Toyota. I know all the Steinway snobs will get their panties in a bunch over this, but oh well. Steinways are overrated."

What is it with you. You insult anyone who owns a Steinway and their piano. I don't think you would say such things if you were meeting me and other Steinway owners in person. Your opinions about pianos, their owners and cars are worthless.
Posted by: Rickster

Re: Steinway Bought Out and Going Private - 07/08/13 10:43 AM

This thread has served its purpose and is no longer news worthy. I’d hate to see it morph further into unfriendly territory and exchanges of opinions that have nothing to do with Steinway being bought out…

If something new develops someone can start a new thread.

Rickster