Fender Keeps Evolving
Fender Musical Instrument Corp. may be considered the world’s largest guitar maker but it’s not immune to the economy and consumer’s whims, as its own history shows.
The Arizona-based company’s $200 million initial public offering launched in March and was expected to pay down $246.2 million in debt and raise about $100 million in working capital. But the IPO has not had the response Fender was aiming for, according to the New York Times.
Investors balked at the steep price –$396 million at the time of the public filing – and question how Fender, despite reported sales in 85 countries, can continue to grow and compete in an ever-changing music industry.
Fender has already been through several owners prior to the IPO. Founder Leo Fender sold the company to CBS in 1965, which sold it to an investor group 20 years later.
In 2001, private equity firm Weston Presidio acquired 43 percent of Fender and is now reportedly looking to sell. Its Japanese distributor, Yamano Music, holds the No. 2 stake with 14 percent.
Games like “Guitar Hero” continue to help sales but the trend of creating music on laptops is drawing a wider audience. Sales of all musical instruments in the U.S. – considered a luxury item to the average family – totaled $6.5 billion in 2011, down about 13 percent from their peak in 2005, the Times quoted from music trades.
Likewise Guitar Center, controlled by Bain Capital and crucial to Fender’s sales, is having its own financial problems. The company has reportedly been losing money ever since its 2007 sale Bain, the paper said.
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