Evaluation of Acquisition of Steinway Musical Instruments by John A. Paulson

The Acquisition

Back to the year 2011, the world’s most famous manufacturer of musical instrument, Steinway Musical Instruments Corporation, had begun to considerate the offer to acquisition. Two member of the board of directors, Dana Messina and John Stoner set up the special committee to discuss the acquisition deals. But Steinway turned down the Stoner-Messina offer in 2012,12 and declared that the company was not for sell.

Now it’s time to take a fresh look at this issue. Kohlberg & Co. announced that they are going to offer a price of $448 million to take an overall acquisition, and Steinway accepted the $35-per-share Kohlberg proposal. However, at the last days in the 45-day “go-shop” period, a second, unidentified suitor offered a higher price: $38-per-share and $477 in total.

This mysterious competitor is John Paulson, a hedge fund billionaire. In the end, Steinway announced that it would be acquired for approximately $512 million, $40-per-share, and the investment firm Paulson & Co. has completed its approximately $499 million purchase of Steinway in Sep, 2013. Kohlberg & Co. refused to increase its offer so Steinway will be required to pay Kohlberg a $13.35 million termination fee. This deal makes Steinway a private company, again. John A. Paulson

Born in Queen, now John A. Paulson is one of the top American hedge fund mangers, or maybe the best. Warren E. Buffett used to say; “Be fearful when others are greedy, and be greedy when others are fearful”, and John Paulson followed this phrase.

John Paulson became a billionaire by short-selling subprime mortgages in 2007 and earned $3.7 billion that year. During the Economic crisis, he made money from U.S. stock market, real estate and gold market. John Paulson ranked #45 among the world’s