The Steinway Musical Instruments Inc. takeover drama is a solo act again.
The private equity firm Kohlberg & Co., which had offered $438 million for Steinway, on Tuesday dropped out of the running to buy the famed piano maker. Another bidder that emerged earlier this week, identified by several media outlets as the hedge fund firm of John Paulson, appeared to be the only remaining contender to buy the Waltham company.
Steinway had agreed to sell to Kohlberg for $35 per share six weeks ago. The company’s board had the opportunity to seek higher offers in a 45-day “go shop” that is set to expire Wednesday night.
Steinway said Monday that another investment firm had topped Kohlberg’s price by offering $38 per share, or $477 million. The next day, Kohlberg disclosed in a regulatory filing that it would not compete against the higher offer. Steinway executives did not return calls, and a spokesman for Paulson & Co. declined to comment.
Even though Kohlberg failed to walk away with the prize, it stands to gain $6.7 million — the sum Steinway will be required to pay to terminate the original deal. The companies agreed the termination fee would double if a higher offer came in from a firm that had previously negotiated with Steinway. The fact that the fee will not increase, confirmed by Steinway on Monday, suggests the Paulson offer came late in the competition.
“This new entity came in at the very end of the process,” said Arnold Ursaner, an analyst with CJS Securities in New York. “Kohlberg had probably concluded that $35 a share was their best bid. The challenge you have in valuing a company like a Steinway is that it’s a luxury global brand, and the value is in the eyes of the beholder.”
Now, any other companies interested in Steinway have until midnight Wednesday to top Paulson’s offer. A representative for Steinway said Monday that a deal with the new suitor would not include another go-shop period.
Investors expecting a bidding war for Steinway had pushed the company’s shares above the latest offer price Monday, when the stock closed at $39.59 per share.
But Steinway shares dropped $1.32 on Tuesday, or 3.3 percent, to close at $38.27.