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Acquisition Of Steinway Musical Instruments, Inc. By Kohlberg & Company May Not Be In The Best Interests Of Steinway Shareholders

Stocks in this article: LVB

SAN DIEGO and WALTHAM, Mass., July 1, 2013 /PRNewswire/ --  Shareholder rights attorneys at Robbins Arroyo LLP are investigating the acquisition of Steinway Musical Instruments, Inc. (NYSE: LVB) ("Steinway") by Kohlberg & Company ("Kohlberg"), a global private equity investment firm.  On July 1, 2013, Steinway announced that it has entered into a definitive agreement with Kohlberg in which Kohlberg will commence a tender offer to acquire all of the outstanding shares of Steinway's common stock for $35.00 per share in cash.


Is the Acquisition Best for Steinway and Its Shareholders?

Robbins Arroyo LLP's investigation focuses on whether the board of directors at Steinway is undertaking a fair process to obtain maximum value and adequately compensate its shareholders in the merger.  The $35.00 merger consideration represents a premium of only 15.2% based on Steinway's closing price on June 28, 2013, the last trading day prior to the acquisition announcement.  The 15.2% premium is substantially below the median premium of 29.70% for comparable transactions in the past five years.

On May 5, 2013, Steinway released financial results for the first quarter of its fiscal year 2013, reporting net income of $2.7 million for the 2013 period compared to $0.06 million for the prior-year period.  Specific to its piano and band operations, Steinway reported that: (i) piano operations' first quarter revenue totaled $45.4 million, a 2.9% increase over the prior-year quarter; and (ii) sales of higher-margin instruments, coupled with price increases, led to band operations' exceptional gross margin improvement of 600 basis points over the first quarter of 2012.

In response to these results, Chief Executive Officer Michael Sweeney noted that "first-quarter results demonstrate significant improvement in [the company's] profitability profile."  Mr. Sweeney concluded, "We see an exciting path to growth for our Company. The steps we took in mid-2012 to ramp up Steinway grand piano production will soon enable us to realize even more fully the operating leverage inherent in our business."

Given these facts, the firm is examining Steinway's board of directors' decision to be acquired by Kohlberg now rather than allow shareholders to continue to participate in the company's continued success and future growth prospects.   

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