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Steinway Attracts Chinese Suitor

Aug. 7, 2018
The company, maker of iconic pianos, could fetch about $1 billion in a sale.

Steinway Musical Instruments Inc., the legendary piano maker controlled by U.S. hedge fund billionaire John Paulson, has attracted takeover interest from China Poly Group Corp., people familiar with the matter said.

The state-owned conglomerate is holding preliminary talks about a purchase of Steinway, according to one of the people, who asked not to be identified because the deliberations are private. The company, whose iconic pianos have been used by virtuosos such as Lang Lang, could fetch about $1 billion in a sale, the people said.

Poly Group is doing due diligence work on Steinway as well as seeking financing and government approvals for an offer, the people said. The piano maker has also attracted other potential buyers such as private-equity firms and companies, the people said.

Steinway should be able to fetch a high valuation given that the company may reach 30% to 40% annual sales growth in China, according to Shaun Rein, founder and managing director of the China Market Research Group. A Chinese company like Poly Group could help improve Steinway’s distribution network in the country, which has been weak so far, he said.

“Steinway has massive potential in China as consumers love the brand,” Rein said by phone Tuesday. “As Chinese middle-class families get wealthier, they’ll be willing to spend on a luxury piano for their kids as they see music as a key part of their education. And nobody beats Steinway on that.”

Poly Group started in 1992 as a supplier of defense equipment for the Chinese military. The conglomerate now has operations spanning explosives manufacturing, real estate, mining, cinemas and the arts.

The conglomerate’s Hong Kong-listed unit Poly Culture Group Corp. owns China’s biggest home-grown auction house. It also runs a chain of theaters that have hosted musicals like “Cats” and performances by the likes of the London Symphony Orchestra.

Paulson’s New York-based investment firm Paulson & Co. agreed to acquire Steinway in 2013 for about $512 million, beating rival bidders including South Korea’s Samick Musical Instruments Co.

The piano maker that gave the company its name was founded in 1853 by German immigrant Henry Engelhard Steinway in a Manhattan loft on Varick Street, and over the following decades became a brand recognized worldwide. In March, it opened a new Asia-Pacific headquarters in Shanghai.

Paulson has a net worth of $5.5 billion, according to the Bloomberg Billionaires Index. An official at Poly Group and a representative for Paulson & Co. declined to comment. A representative for Steinway didn’t immediately reply to queries outside regular U.S. business hours.

By Bloomberg News

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