What?s in store for the publicly traded and their future in M&A
March 9, 2012
Fender Musical Instruments Corp., an icon of the American music business, is strumming to a different tune. The stringed instruments manufacturer and its private equity owner, Weston Presidio, are pursuing an initial public offering for the Scottsdale, Arizona-based company. On March 8 Fender submitted its S-1 to the Securities and Exchange Commission stating that it would like to raise approximately $200 million.?
According to the filing, Fender intends to use about half of the anticipated proceeds to repay outstanding debt. The company noted that it may also use some of the money to acquire other business, products and technology. However, Fender cautioned that it doesn?t have any deals in the works and that seeking future transactions may distract management?s time and attention from daily operations.? ?To the extent that we are not able to identify or complete additional acquisitions on satisfactory terms or at all, our ability to grow our business and expand our product lines may be adversely affected,? the company said.
Fender is well-versed in acquisitions, given that it?s been bought and sold a few times. The company started off as Fender Electric Instrument Company, when it was founded by Leo Fender in 1946. By 1965, Columbia Broadcasting System (CBS) bought the business and added it to the records distribution division. CBS then spun Fender out as a stand-alone business and sold it to William Schultz and William Mendello in 1985. The two business executives bought the company for an unknown amount and renamed it Fender Musical Instruments Corp. ?
Over the years, Fender took part in several joint ventures and acquisitions but a lot of time passed since Fender bought anything. In 2007, it acquired Kaman Music Corp., a musical instruments and accessories distributor, for a reported $117 million. Fender renamed the business KMC Musicorp, and the new addition allowed the company to increase its product offerings in percussions and accessories. The deal came with distribution rights of more than 100 brands, including the Ovation, Latin Percussion, Toca, Gibraltar, Genz Benz and Hamer.
If Fender is serious about building through acquisitions, it should take note from competitors. Gibson Guitar made its most recent acquisition in 2011, when it acquired the sound and lighting equipment and electronic music accessory company, the Stanton Group. The Deerfield Beach, Florida business came with several divisions, including the professional and home audio system, Cerwin Vegal!; KRK Systems, a monitor and subwoofer brand; and the disc jockey equipment and accessory brand, Stanton DJ. Nashville, Tennessee-based Gibson took the new assets and placed them in Gibson Pro Audio, a new division.?
According to the filing, in the acoustic guitar market, Fender listed Nazareth, Pennsylvania-based Martin & Co., El Cajon, California-based Taylor Guitars and the Hamamatsu Shizuoka, Japan-based Yamaha Corporation as primary competitors. Fender looks at the Agoura Hills, California-based Line 6 and Milton Keynes, England-based Marshall Amplification as its direct competitors in the guitar amplifier market.
J.P. Morgan is listed as Fender?s lead underwriter along with William Blair & Company, Baird, Stifel Nicolaus Weisel and Wells Fargo Securities.
Alison Ressler and John Savva from Sullivan & Cromwell LLP and Kevin Kennedy of Simpson Thacher & Bartlett LLP are providing legal advice on the offering.
I?ll be sure to keep you in the loop on Fender?s IPO plans.
Speaking of Updates:?
Facebook Inc. kept everyone on the edge of their seats on Feb. 1 when it filed its S-1 late in the afternoon. The social networking site still hasn?t priced but it did add several new underwriters for its IPO. On March 7, Facebook updated its SEC filing with 25 new underwriters, bringing the total up to 31. Citigroup, Credit Suisse, Deutsche Bank, RBC Capital and Wells Fargo are among the top five banks to join the highly anticipated initial public offering.? Facebook also increased its credit line to $5 billion. For a couple of quick facts on Facebook?s IPO see No Longer an Accidental Billionaire.?
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