NEW YORK ( TheDeal) - Steinway Musical Instruments ( LVB) changed its tune this week, agreeing to be acquired by private equity firm Kohlberg & Co. LLC for about $438 million. The surprise announcement by the Waltham, Mass.-based musical instrument company came six months after the company, famed for its concert pianos, pulled back from exploring strategic alternatives that had resulted in serious offers being composed. The latest transaction has a 45-day go-shop period during which the company may solicit alternative proposals. The deal is expected to close in the third quarter. "Our agreement with Kohlberg represents an exceptional valuation for our shareholders, while also representing an important next step in the growth of Steinway," Steinway chairman and interim CEO Michael Sweeney said in a statement. Mount Kisco, N.Y.-based Kohlberg will commence a tender offer of $35 per share in cash, which Steinway said is a 33% premium to the average closing price of its common shares for the 90 trading days ended June 28, and a 45% premium to the average closing price for the 52-week period ended June 28. In July 2011 Steinway's former management, chairman Kyle Kirkland and chief executive Dana Messina, made an unsolicited offer with no financial details attached to acquire Steinway's band and online divisions. If it had been successful, it would have been a dismantling of the music instruments manufacturing business the two had built up over the past two decades. Steinway, in its current iteration, was a rollup of several companies by Kirkland and Messina after they used a musical instruments maker company they took public to buy the concert piano maker in 1995, adopting the more famed Steinway name for their musical instruments empire. After the former executives revealed their intention to bid for the band and online divisions in July 2011, Steinway hired Allen & Co. LLC to evaluate its alternatives. In September 2011 Steinway passed a poison pill to ward off any unsolicited attempts to buy the company, as it evaluated the management-led buyout offer. By January 2012, Steinway looked like it was going to do a deal with Kirkland and Messina, who had left the company and were backed by Steinway's largest shareholder, South Korean piano manufacturer Samick Musical Instruments Co. Ltd. Samick had about a 31.3% stake in the company as of May 8, according to regulatory filings.
That deal never came to fruition, apparently, as on Dec. 26, the company said its strategic review was at an end with no deal in sight. Steinway did sell its flagship Steinway Hall store, located at 109 West 57th St. in Manhattan, for $46 million in a deal announced March 26. A previous deal to sell the building announced Nov. 14 for $56.3 million fell through. That asset had also been part of the strategic review. Steinway was formed by Messina and Kirkland, former junk bond traders, when the two acquired Selmer Co. in 1993 for $95 million and took it public a year later. Selmer then acquired Steinway for $104 million in 1995. In 2000, the company added United Musical Instruments Inc. for $85 million in cash and debt, expanding its musical instrument empire to include brass and drum instruments, in addition to pianos and woodwinds. In 2008 Steinway bought online classical music retailer ArkivMusic LLC for $4.5 million. Steinway, through its Steinway and Conn-Selmer divisions, designs and manufactures musical instruments, with a product lineup that includes Steinway & Sons pianos, Bach Stradivarius trumpets, Selmer Paris saxophones, C.G. Conn French horns, Leblanc clarinets, King trombones and Ludwig snare drums. Allen & Co. served as Steinway's financial adviser. Gibson, Dunn & Crutcher LLP's John Gaffney, Aaron Holmes, Jennifer Wang and Yi Sun and a Skadden, Arps, Slate, Meagher & Flom LLP team consisting of Kenton King, Amr Razzak, Jason Tomita, Carrie LeRoy, Michael Bergmann, Alessandra Murata, Ulrich Ziegler, Jane Kroesche, David Kitchen, K. Kristine Dunn and Jessica Hough provided Steinway with legal counsel. Ropes & Gray LLP advised Kohlberg. Written by Richard Collings in New York