In what is a relatively rare move for private equity firm Paulson & Co., the firm is competing with Kohlberg & Co. to acquire Steinway Musical Instruments Inc. (LVB). Steinway announced yesterday that it had received an offer of $38 a share for the company from an unnamed investment company, and that company has turned out to be Paulson.
John Paulson’s reputation was built on betting against U.S. mortgage-backed securities back before the housing meltdown started, and his bid for Steinway could be a new tack for his namesake firm. Paulson & Co. has about $18 billion in assets under management, a sharp decline from the $38 billion the firm claimed at its peak in 2011.
Paulson has been hit hard by the decline in gold prices and likely is taking a new tack in an effort to regain some of the firm’s losses. Steinway by itself will not turn the firm around, but it is a first step into the market for luxury goods, a sector that has attracted more interest from private equity as they try to take advantage of a recovery in the financial condition of wealthier buyers and investors. Steinway’s pianos and other musical instruments are not cheap, and the company has seen sales boosts in Asia particularly. U.S. and European sales have been depressed.
Kohlberg has until August 14 to match or better Paulson’s bid.
Shares of Steinway posted a new 52-week high of $39.90 Monday as investors anticipated a bidding war. In premarket trading today, shares are down to $38.10.