Famed piano maker Steinway sold for $512 million

Kevin McCoy | USA TODAY

Venerable piano maker Steinway is being sold in a $512 million deal after hedge fund manager John Paulson made sweeter music for investors by topping a tentative July agreement with from Kohlberg & Co.

The Waltham, Mass.-based company announced Wednesday it had terminated the $35-per-share deal with Kohlberg and reached a definitive merger agreement with entities of Paulson & Co. at $40 per share.

Steinway shares soared on the news, closing up nearly 8% at $41.29 in Wednesday trading.

Under terms of the cash transaction, a Paulson affiliate will commence a tender offer within five business days to acquire all outstanding shares of Steinway's common stock in preparation for taking the instrument company private. The company's board of directors unanimously recommended that stockholders tender their shares.

Steinway said it would pay Kohlberg a termination fee totaling approximately $6.7 million.

"The company's proven business model and highly skilled employees provide a strong foundation on which to expand," Paulson said in a formal statement. "We fully intend to maintain the superb quality of Steinway's musical instruments, which are the finest in the world."

Steinway CEO Michael Sweeney said the final deal emerged from a "go-shop" process conducted after the Kohlberg agreement.

The higher-value transaction reflects "the attractive value of the company's heritage and growth opportunities," he said in a statement.

"Our employees, dealers, artists and customers can rest assured that Steinway will be in excellent hands under John Paulson's stewardship," said Sweeney. "He shares the company's commitment to the musical community and embraces our strategies to fully leverage our premier brands and extend our market leadership."

Steinway & Sons was founded in 1853, in the same month that Franklin Pierce succeeded Millard Fillmore as president. Its artisan-crafted pianos are famed for their rich sound, and are used by musicians worldwide.