Guitar Center Agrees to Buyout

The latest round of private equity activity meant that it was only a matter of time before the guitar industry would become involved.

Wed. June 27, 2007 11:30 am

Major Shakeup in Music Retail:
Guitar Center to be Acquired by Bain Capital

The concept of an outside company getting into the guitar industry is certainly nothing new – you may recall Fender’s sale to CBS in 1965, or Norlin’s acquisition of Gibson in 1969. And while these outside deals have tapered off in recent years, the latest round of private equity activity meant that it was only a matter of time before the guitar industry would become involved again.

On June 27, 2007, Guitar Center inked a deal with global private investment firm Bain Capital Partners, LLC to sell the company in a deal valued at $2.1 billion – $1.9 billion in cash, plus the value of assumed debt. The deal, which was agreed upon by both parties on June 27, will give current Guitar Center stockholders $63 for each share held – a 26% increase from the stock’s June 26 close of $50 per share. This is the culmination of an auction process, led by Goldman, Sachs & Co. to solicit interest for an acquisition of the company.

The deal, which likely won’t close until the fourth quarter of 2007 and is still subject to stockholder approval, will affect Guitar Center’s more than 210 stores, their education programs and their online retail store, Musician’s Friend. However, current Chairman and CEO of Guitar Center, Marty Albertson, is confident that the effects will be minimal.

“We are committed to maintaining our vendor relationships and ensuring our customers will continue to experience the same quality and selection of musical instrument products as well as the high level of service and professional advice through our stores and our websites,” Albertson stated.

Jordan Hitch, Managing Director with Bain Capital echoed those sentiments, saying in a press release, “As the leading retailer of musical instruments in the U.S., Guitar Center enjoys great brand recognition among musicians, a loyal customer base and a track record of significant growth. We look forward to working with the company’s experienced and capable management team to continue to build the business.”

Shortly after the announcement of the deal, Guitar Center’s share price shot up over 19%. If the deal is approved, as is widely expected, Guitar Center will add to Bain Capital’s already booming global portfolio of companies numbering more than 240 worldwide. Bain Capital companies include Toys ‘R’ Us, Burger King and Warner Music Group.

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