Steinway's Sale Is a Sour Note for Made in America
A Model D piano being made at the Steinway factory in Astoria, Queens.
Brian Ross
“Made in America” took another major hit very quietly yesterday. An American musical institution, the 160-year-old American piano maker Steinway and Sons, was sold to a private equity firm, Kohlberg & Co. What does a leveraged buyout firm (LBO) want with one of America’s last iconic musical instrument makers still based in the United States? Ask brand-hungry piano makers in China.
Kohlberg picked up Steinway Musical Instruments Inc. for a reported $438 million. While that was great news for shareholders of the publicly traded Steinway, it is likely to spell the end of the iconic American instrument maker based in Waltham, Mass.
Kohlberg & Co. is a leveraged buyout firm (LBO). LBOs do not generally invest in companies to turn around management and run them more profitably. They look for high returns on the acquisition by finding buyers who will pay significantly more for the profitable parts of the company than its present sum. They also, by taking a public company private prior to its sale to foreign entities, remove much of the public scrutiny of the sale by shareholders, the Securities and Exchange Commission or other governmental entities, and the media that the transaction might generate.
With its rising affluence from its enormous economic prosperity, piano sales in China have been booming. In 2010, 43,778 pianos were made in the United States. China, by contrast made well over 60,000.
The last half decade has been hard on the musical instrument industry. The Great Recession in the United States made luxury items like pianos and the high-end brass and woodwind instruments of Steinway’s other brands, Selmer and Conn, less appealing.
As the economy in the United States comes back, Steinway sales have improved. With prices ranging from the low $60,000’s to as high as $282,000, though, the brand revered by the world’s greatest musicians, music schools, and those who love to play the instrument is finding it harder to sell status-symbol pianos to a new generation of Americans for whom playing music usually means pushing a button on their iPhone or Android, and whose musical tastes increasingly shift from classical and acoustic popular music to largely electronic instruments and sounds.
The musical arts in the United States are under pressure. Cuts to funding of musical programs in schools, and federal funds for the arts are constantly the target of thrifty Tea Party congressmen. Young people seeking big money in the entertainment industry generally don’t see being the next “piano man” as their ticket to stardom.
By contrast, many Chinese families, inspired by home-grown piano phenoms like Lang Lang, who has rock-star status there and a growing international fame, see their children’s mastery of the piano as a ticket to global greatness and financial prosperity.
So it is no wonder that Kohlberg potentially sees an opportunity to vend the venerable Steinway name to Chinese piano manufacturers eager to bring the manufacture of the iconic piano in world music to their shores.
Steinway is also the owner and steward of the great French Selmer brand of woodwinds and Conn’s brass instruments. Those companies would likely find eager buyers in Asia as well.
Steinway, based in Waltham, Massachusetts, celebrated its 160th year as an American piano maker in March of 2013. The company sold its flagship 57th Street store in Manhattan this year to a partnership fronted by JDS Development Group for $46.3 million in cash.
The arts, and the equipment that supply them, are perhaps America’s greatest export. With Hollywood companies altering films for the Chinese market to chase billions in box office there, and the Chinese possibly buying up our cultural icons like Steinway, it is only a matter of time before we lose our second biggest export after foodstuffs.
There is a period where Steinway can seek another buyer over the next forty-five days during a “go shop” period. If no American buyer steps up, our most iconic American musical brand will cease being “made in America,” and our leadership in yet another area of craftsmenship, economics and nearly two centuries of American musical excellence will possibly be dealt to China for the short-term gain of a few million dollars.
Steinway is worth more than that to America. The deal should be stopped.
My shiny two.
Kohlberg & Co. is a leveraged buyout firm (LBO). LBOs do not generally invest in companies to turn around management and run them more profitably. They look for high returns on the acquisition by finding buyers who will pay significantly more for the profitable parts of the company than its present sum. They also, by taking a public company private prior to its sale to foreign entities, remove much of the public scrutiny of the sale by shareholders, the Securities and Exchange Commission or other governmental entities, and the media that the transaction might generate.
With its rising affluence from its enormous economic prosperity, piano sales in China have been booming. In 2010, 43,778 pianos were made in the United States. China, by contrast made well over 60,000.
The last half decade has been hard on the musical instrument industry. The Great Recession in the United States made luxury items like pianos and the high-end brass and woodwind instruments of Steinway’s other brands, Selmer and Conn, less appealing.
As the economy in the United States comes back, Steinway sales have improved. With prices ranging from the low $60,000’s to as high as $282,000, though, the brand revered by the world’s greatest musicians, music schools, and those who love to play the instrument is finding it harder to sell status-symbol pianos to a new generation of Americans for whom playing music usually means pushing a button on their iPhone or Android, and whose musical tastes increasingly shift from classical and acoustic popular music to largely electronic instruments and sounds.
The musical arts in the United States are under pressure. Cuts to funding of musical programs in schools, and federal funds for the arts are constantly the target of thrifty Tea Party congressmen. Young people seeking big money in the entertainment industry generally don’t see being the next “piano man” as their ticket to stardom.
By contrast, many Chinese families, inspired by home-grown piano phenoms like Lang Lang, who has rock-star status there and a growing international fame, see their children’s mastery of the piano as a ticket to global greatness and financial prosperity.
So it is no wonder that Kohlberg potentially sees an opportunity to vend the venerable Steinway name to Chinese piano manufacturers eager to bring the manufacture of the iconic piano in world music to their shores.
Steinway is also the owner and steward of the great French Selmer brand of woodwinds and Conn’s brass instruments. Those companies would likely find eager buyers in Asia as well.
Steinway, based in Waltham, Massachusetts, celebrated its 160th year as an American piano maker in March of 2013. The company sold its flagship 57th Street store in Manhattan this year to a partnership fronted by JDS Development Group for $46.3 million in cash.
The arts, and the equipment that supply them, are perhaps America’s greatest export. With Hollywood companies altering films for the Chinese market to chase billions in box office there, and the Chinese possibly buying up our cultural icons like Steinway, it is only a matter of time before we lose our second biggest export after foodstuffs.
There is a period where Steinway can seek another buyer over the next forty-five days during a “go shop” period. If no American buyer steps up, our most iconic American musical brand will cease being “made in America,” and our leadership in yet another area of craftsmenship, economics and nearly two centuries of American musical excellence will possibly be dealt to China for the short-term gain of a few million dollars.
Steinway is worth more than that to America. The deal should be stopped.
My shiny two.
SOURCE: The Huffington Post
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