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Firm offers to pay $477 million for Steinway

New bid is 9% higher than offer by Kohlberg

Kohlberg & Co. has until Wednesday to up its price of $438 million for Steinway or the Waltham company will be sold to the investment firm that submitted the higher offer.

Timothy A. CLARY/AFP/Getty Images/file 2005

Kohlberg & Co. has until Wednesday to up its price of $438 million for Steinway or the Waltham company will be sold to the investment firm that submitted the higher offer.

The stage may be set for a bidding war over Steinway Musical Instruments Inc.

The Waltham company that accepted a $438 million takeover offer from the private equity firm Kohlberg & Co. six weeks ago has received a higher offer from a second, unidentified suitor. Steinway said Monday the new $38-per-share offer amounted to $477 million, about 9 percent more than the Kohlberg bid.

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The Steinway board’s original decision in late June to accept the $35-per-share Kohlberg proposal triggered a 45-day “go shop” period to seek better bids. That period was scheduled to end Wednesday. Now Kohlberg has until Wednesday to up its price, or Steinway will be sold to the investment firm that submitted the higher offer.

Investors bid up Steinway shares above the new offer price Monday, anticipating another round of higher offers. Steinway stock, which hit an all-time high $39.90 per share in midday trading, closed up 9 percent at $39.59.

“We’ve very pleased that another credible buyer is interested in the company and understands the value of our business and our brands,” said Julie Theriault, a spokeswoman for Steinway.

Both bidders would make the company private again and take it off the New York Stock Exchange, where it has traded for 17 years under the ticker symbol LVB, short for Ludwig van Beethoven.

But so far, the offers come with a few key differences.

Unlike the Kohlberg offer, the proposal by the new bidder is not contingent on financing.

Steinway has already signed a merger agreement with Kohlberg, and the company said it would be required to pay a termination fee of $6.7 million to break it.

The fee is a point of contention for shareholders, three of whom are enjoined in a class-action lawsuit against Steinway. The shareholders claim the price the board accepted from Kohlberg was too low and marred any future negotiations with other bidders.

Kohlberg did not return calls seeking comment. The identity of the new bidder will not be disclosed until it signs a merger agreement with Steinway, which could only occur if Steinway ended its deal with Kohlberg.

The announcement of the new offer came less than a week after the piano maker released strong second-quarter results. Total sales of pianos and band instruments climbed to $92 million, up nearly 8 percent from the same three-month period in 2012. Operating income jumped 44 percent to $8.6 million.

The gains were attributed to piano sales, which increased 12.7 percent. Sales in the company’s band instruments division, which makes Selmer saxophones, Conn French horns, and Ludwig snare drums, rose just 0.7 percent.

“From a private equity firm view, this is a very attractive company,” said Arnold Ursaner, president and analyst of CJS Securities in New York. “It generates very strong free cash, it is not overly capital intensive, and it has a long history of performance.”

Taryn Luna can be reached at taryn.luna@globe.com.
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