BY MARILYN ODENDAHL
modendahl@etruth.com
WALTHAM, Mass. -- With a substantial influx of capital and the company's chief executive officer noting the current market has some "interesting acquisition opportunities," Steinway Musical Instruments soon may be going shopping.
On Thursday, Steinway, parent company of Conn-Selmer in Elkhart, Ind., announced it received $27 million in cash from Samick Musical Instruments Co. as part of a common stock agreement. The Massachusetts-based company sold 1.7 million shares of common ordinary stock for $16 per share, about 37 percent above the closing market price per share on Oct. 28.
A press release detailing the private placement of common stock stated the company plans to use the proceeds to retire outstanding debt and for general corporate purposes.
In the same release, Kyle Kirkland, Steinway chairman, said company has "seen several opportunities to increase our market presence" and the added liquidity enables it to "move aggressively on opportunities as they arise."
Dana Messina, Steinway CEO, reiterated those points while reviewing third-quarter results with investors Thursday afternoon. He said the cash increases the company's "financial flexibility" to either reduce debt or look at some of the "interesting acquisition opportunities out there."
Speaking before the conference call, analyst Arnold Ursaner of CJS Securities said Steinway does not need the cash but it does position the company "to pursue multiple growth strategies."
Samick, which has its American headquarters in Gallatin, Tenn., manufactures pianos and guitars. Ursaner does not expect Steinway to form any type of partnership since Samick makes lower-end instruments and Steinway does not seem interested in that market.
Consequently, for the workers at the Conn-Selmer facilities in Elkhart, Ursaner does not believe the stock agreement will take away jobs.
Other terms of the agreement grant Samick the right to purchase another 1.7 million shares for the same price by March 31, 2010. It also puts Jong Sup Kim, chairman of Samick Musical Instruments, on the Steinway board of directors.
For the third quarter, Steinway reported an 18 percent drop in revenue to $82.6 million but still posted net income of $637,000. This is an improvement over a loss of $260,000 reported at the end of the third quarter in 2008.
The nine months that ended Sept. 30 saw revenues drop to $224.7 million from $293.2 million during the same period in 2008. Net income fell to $1.02 million from $4.76 million.
Steinway's balance sheet includes $50 million in cash and $227 million in working capital.
Messina also spoke briefly about the decertification of United Auto Workers Local 364 at the Vincent Bach plant in Elkhart, which ended a protracted and bitter strike.
Noting the work force in the facility is evenly divided between new hires and union members who crossed the picket line, Messina said once the decertification was completed, the company was allowed to reduce the former union employees' wages from an average of $24 an hour to $17 an hour.