Steinway Agrees to Acquisition by Paulson & Co.

High-end musical instruments maker Steinway Musical Instruments Inc. (NYSE: LVB) has agreed to be acquired by affiliates of private equity firm Paulson & Co. for a purchase price of $40 a share, or about $512 million. A Paulson company will initiate a tender offer within five days for all of the outstanding stock, and Steinway’s board recommends that shareholders accept the offer.

And why not? The initial offer to take the company private from Kohlberg & Co. came in at $35 a share. Steinway reported on Monday that it had received a second offer of $38 a share from an unnamed investment firm that ultimately turned out to be Paulson, and the final deal boosts the cash price to $40 a share. What’s not to like?

Steinway will have to pay a breakup fee of about $6.7 million to Kohlberg, which amounts to about $0.50 or so per outstanding share. Pending regulatory approvals, the deal is expected to close in late September.

Shares of Steinway are up about 5% in premarket trading, at $40.25 in a prior 52-week range of $20.61 to $39.90.