It's all over but the strumming. Guitar Center (NASDAQ:GTRC) is kicking off a farewell tour this morning, announcing that it will be acquired by Bain Capital in a $2.1 billion deal.
Sure, The Police reunion or the recently cancelled Kelly Clarkson tour may be meatier concert venue news, but the musical gear retailer getting bought out in a cash deal at $63 a share is a pretty noteworthy headliner today.
The purchase price is a healthy 26% premium to the stock's close yesterday. However, it is slightly lower than the highs that Guitar Center set two summers ago. It has to sting that Guitar Center was smaller then, with fewer namesake stores, less of an online presence, and before it became a sex cymbal in the retail band and orchestra equipment market by acquiring The Woodwind & The Brasswind out of bankruptcy court.
In other words, Bain is getting a better Guitar Center today than investors were bidding up two years ago. Sure, there have been a few bad notes played along the way, but this is still a company that has been mostly successful in growing sales at the store level. That is something that can't be said for most niche retailers.
Giants like Wal-Mart (NYSE:WMT) and Best Buy (NYSE:BBY) have devoured industries like toy retailing and record shops. They'll never take down Guitar Center. Yes, I've seen a stray guitar or two at both of those chains, but they'll never be able to dedicate the shelf space -- or hire the knowledgeable personnel -- to stock a row of Gibson and Fender electric six-strings.
Activision's (NASDAQ:ATVI) Guitar Hero is getting folks excited about playing music again. Heck, even my 13-year-old son was interested in hearing me talk about Lynard Skynyrd's devastating plane crash and the album cover art fiasco that followed after he aced Free Bird on expert mode. Software programs like Apple's (NASDAQ:AAPL) iLife GarageBand software is fueling a cottage industry -- or is that garage industry? -- of quality home recording.
Guitar Center? You're selling yourself off too cheaply -- and too soon -- given your growth prospects. That's the first rule of encores. If the crowd is cheering at the end of the show, you always come back for more.
For related Foolishness:
- While My Guitar Center Gently Weeps
- The Best Retail Stock for 2007: Guitar Center
- Guitar Center's Hammering Solo
Best Buy and Activision are Stock Advisor recommendations. Wal-Mart is an Inside Value selection. Jam along to either newsletter with a free 30-day trial subscription.
Longtime Fool contributor Rick Munarriz plays guitar and keyboards, but feels that even he went overboard on the musical metaphors this time. He does not own shares in any of the companies in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.
