Guitar Center to Be Bought by Bain Capital Partners LLC for $1.9 Billion

TDPRI · June 27th, 2007, 06:56 PM

Guitar Center to Be Bought by Bain Capital Partners LLC for $1.9 Billion

June 27, 2007 from Bloomberg.com

Guitar Center Inc., the largest U.S. retailer of musical instruments, agreed to be bought by Bain Capital Partners LLC for $1.9 billion.

Bain will pay $63 a share in cash, Guitar Center said today in a statement, 26 percent more than the stock's closing price yesterday. The buyout firm will also assume Guitar Center's debt, bringing the total transaction value to $2.1 billion.

Guitar Center sells Fender guitars, Pearl drums and Yamaha keyboards at more than 210 U.S. stores and online. Bain was part of a group that agreed last week to buy Home Depot Inc.'s contractor-supply unit for $10.3 billion, and has also invested in retailers Toys `R'' Us Inc. and Michaels Stores Inc.

"They are the market leader in the musical instruments business,'' said Joan Storms, an analyst at Wedbush Morgan Securities in Los Angeles who rates the shares "hold.''

Guitar Center reported revenue gains of at least 12 percent every quarter since 1998. Sales climbed 14 percent to $2.03 billion last year, a sixfold increase since the company went public in 1997.

The shares jumped $9.92, or 20 percent, to $59.98 at 4 p.m. New York time in Nasdaq Stock Market composite trading. The stock has almost quadrupled since its initial share sale at $15.

Guitar Center began in 1959 when former car salesman Wayne Mitchell purchased a small appliance and organ store in Hollywood, California. In 1964, Mitchell converted a movie theater next door and opened the first Guitar Center on Sunset Boulevard.

RockWalk

The company operates the Hollywood RockWalk in front of its store on Sunset. The monument features cemented handprints and plaques honoring influential rock musicians such as John Lennon and Jimi Hendrix and instrument makers including Les Paul.

Competitors include Sam Ash Music Corp., which operates 45 U.S. stores.

Guitar Center is bigger than its competitors, making it unlikely a rival could have bought them, said Thierry Wuilloud, who helps manage $2.7 billion at Becker Capital Management in Portland, Oregon.

Acquisitions

Guitar Center bought bankrupt band and orchestra-instrument retailer The Woodwind & The Brasswind for about $30 million in February. In 2005 it paid $90 million for closely held Music & Arts Center, which sells and rents oboes, trumpets and other school-band instruments to students and teachers.

Music & Arts, which has more than 95 stores, may be sold after the transaction is complete, according to Gary Balter, an analyst at Credit Suisse Group in New York.

"Guitar Center seems like the perfect'' company for a buyout, Balter wrote today in a research note. "They have a dominant retail position in a high service business yet significantly under-earn other high service oriented retail.'' He rates the shares "neutral.''

Guitar Center's board approved the purchase and recommended stockholders back the deal. Bain and Guitar Center expect the purchase to close in the fourth quarter.

nonvintage · June 27th, 2007, 09:41 PM

Guitar center opened in 1964 by a car salesman. Speaks for itself.

Rick Towne · June 28th, 2007, 01:37 AM

These going private deals are motivated by a need to substantially increase value to the new owners. How can that be done in a manner that is good for the buying public, or the somewhat more sophisticated clientele of this board?

antennahead · July 14th, 2007, 03:00 AM

Quote:

Originally Posted by Rick Towne

These going private deals are motivated by a need to substantially increase value to the new owners. How can that be done in a manner that is good for the buying public, or the somewhat more sophisticated clientele of this board?

I am a guitar player first and a banker second (although the bills are paid the other way around lol). This quote says it all:

"They have a dominant retail position in a high service business yet significantly under-earn other high service oriented retail.'' He rates the shares "neutral.''

I see prices going through the roof, full retail here we come.

Jay Jordan · January 4th, 2008, 07:36 PM

Quote:

Originally Posted by nonvintage

Guitar center opened in 1964 by a car salesman. Speaks for itself.

So you're saying '64 was a bad year?

June 27th, 2007, 06:56 PM	#1 (permalink)
TDPRI Administrator Poster Extraordinaire Join Date: Mar 2003 Location: TDPRILAND Posts: 5,582 36 Photos	Guitar Center to Be Bought by Bain Capital Partners LLC for $1.9 Billion Guitar Center to Be Bought by Bain Capital Partners LLC for $1.9 Billion June 27, 2007 from Bloomberg.com Guitar Center Inc., the largest U.S. retailer of musical instruments, agreed to be bought by Bain Capital Partners LLC for $1.9 billion. Bain will pay $63 a share in cash, Guitar Center said today in a statement, 26 percent more than the stock's closing price yesterday. The buyout firm will also assume Guitar Center's debt, bringing the total transaction value to $2.1 billion. Guitar Center sells Fender guitars, Pearl drums and Yamaha keyboards at more than 210 U.S. stores and online. Bain was part of a group that agreed last week to buy Home Depot Inc.'s contractor-supply unit for $10.3 billion, and has also invested in retailers Toys `R'' Us Inc. and Michaels Stores Inc. "They are the market leader in the musical instruments business,'' said Joan Storms, an analyst at Wedbush Morgan Securities in Los Angeles who rates the shares "hold.'' Guitar Center reported revenue gains of at least 12 percent every quarter since 1998. Sales climbed 14 percent to $2.03 billion last year, a sixfold increase since the company went public in 1997. The shares jumped $9.92, or 20 percent, to $59.98 at 4 p.m. New York time in Nasdaq Stock Market composite trading. The stock has almost quadrupled since its initial share sale at $15. Guitar Center began in 1959 when former car salesman Wayne Mitchell purchased a small appliance and organ store in Hollywood, California. In 1964, Mitchell converted a movie theater next door and opened the first Guitar Center on Sunset Boulevard. RockWalk The company operates the Hollywood RockWalk in front of its store on Sunset. The monument features cemented handprints and plaques honoring influential rock musicians such as John Lennon and Jimi Hendrix and instrument makers including Les Paul. Competitors include Sam Ash Music Corp., which operates 45 U.S. stores. Guitar Center is bigger than its competitors, making it unlikely a rival could have bought them, said Thierry Wuilloud, who helps manage $2.7 billion at Becker Capital Management in Portland, Oregon. Acquisitions Guitar Center bought bankrupt band and orchestra-instrument retailer The Woodwind & The Brasswind for about $30 million in February. In 2005 it paid $90 million for closely held Music & Arts Center, which sells and rents oboes, trumpets and other school-band instruments to students and teachers. Music & Arts, which has more than 95 stores, may be sold after the transaction is complete, according to Gary Balter, an analyst at Credit Suisse Group in New York. "Guitar Center seems like the perfect'' company for a buyout, Balter wrote today in a research note. "They have a dominant retail position in a high service business yet significantly under-earn other high service oriented retail.'' He rates the shares "neutral.'' Guitar Center's board approved the purchase and recommended stockholders back the deal. Bain and Guitar Center expect the purchase to close in the fourth quarter.

June 28th, 2007, 01:37 AM	#3 (permalink)
Rick Towne Tele-Holic Join Date: Mar 2003 Location: Woodland Hills, CA Posts: 819	Bad news........... These going private deals are motivated by a need to substantially increase value to the new owners. How can that be done in a manner that is good for the buying public, or the somewhat more sophisticated clientele of this board?

June 27th, 2007, 09:41 PM	#2 (permalink)
nonvintage Tele-Meister Join Date: Mar 2006 Location: San Diego Posts: 497	Guitar center opened in 1964 by a car salesman. Speaks for itself.