June 27, 2007
Guitar Center Goes Private
WSJ: (Pay to play, babies, Rupert doesn't want it for nothing)
Guitar Center is the latest retailer to go private, agreeing to a $1.9 billion buyout by Bain Capital Partners LLC.Stockholders would get $63 a share, a 26% premium to Tuesday's closing price. Including debt, the deal -- set to close in the fourth quarter -- is valued at $2.1 billion.
The Westlake Village, Calif., firm has 210 Guitar Center stores in which it sells music instruments as well as music-related computer hardware and software. The company also has than 95 stores specializing in school band instruments for sale and rental.
Goldman Sachs Group Inc. oversaw an auction that wasn't publicly known. Last month, a Goldman stock analyst said in a report that "Guitar Center is optimally positioned for a sale, given its dominant competitive position," but that he viewed a buyout as "a fallback strategy."
I've been an occasional Guitar Center customer. I buy my guitars at Wildwood Guitars, a world class boutique lovingly nestled in nearby Louisville, Colorado. But I have shopped at Guitar Center to get recording gear, drum equipment for my nephews, and accessories. My previous position took me to Austin a few times a year. I met people on the plane who were going to Austin just to go to the Austin Guitar Center store.
I'm probably not schooled enough to offer an opinion, but the LBO and private buyout craze seems a consequence of SarbOx, and somewhat worrisome. I like what the reduction in supply has done but worry that it is a sign of less flexible and competitive US capital markets. That cannot be good in the long term.