$438 Million Deal Will Take Steinway Private

The ivories of storied piano maker Steinway Musical Instruments (NYSE: LVB  ) were tickled to the tune of $438 million, when private equity firm Kohlberg & Co. offered to take the company private, the music maker announced today.

Kohlberg offered Steinway investors $35 a share, which represents a 33% premium over the average closing price during the past 90 trading days, and a 45% premium over its average closing price for the preceding year, according to the company. It's a 15% premium over Friday's closing price

Steinway Musical Instruments Chairman and interim CEO Michael Sweeney said: "Kohlberg has long been one of America's premier private investment firms. We are delighted that they recognize the bright future for Steinway as well as value our great heritage. We look forward to this partnership as we continue our mission of making the world's finest musical instruments without compromise."

The agreement provides for a 45-day "go-shop" period during which  Steinway can look for a better deal. If none is found, Kohlberg will commence a tender off and any shares not tendered will be acquired in a second-step merger at the same cash price as paid in the tender offer. While there are the customary closing conditions that must be met, along with the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, the deal must also get approval from German antitrust regulators. 

The going-private deal, which was unanimously approved by Steinway's board, is expected to close in the third quarter of 2013. The board recommended shareholders tender their shares in the offer.

Allen & Company is serving as financial advisor to Steinway in this transaction while Skadden, Arps, Slate, Meagher & Flom and Gibson, Dunn & Crutcher are acting as legal advisors. Ropes & Gray is acting as Kohlberg's legal advisor. 

A typical Steinway grand piano costs around $50,000, but can run much higher. Steinway & Sons was founded in 1853 by German immigrant Henry Engelhard Steinway in a loft on Manhattan's lower west side. Steinway was a master cabinet maker who built his first piano in the kitchen of his Seesen, Germany home, according to the company website. Steinway also makes Bach Stradivarius trumpets, Selmer Paris saxophones, C.G. Conn French horns, Leblanc clarinets, King trombones, and Ludwig snare drums. Through its online music retailer, ArkivMusic, the company also produces and distributes classical music recordings.

Steinway had previously said it was interested in selling the company. It formally closed on the sale of its famed Steinway Hall on Friday.

-- Material from The Associated Press was used in this report.

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