Shareholder Fights Sale of Steinway

     WILMINGTON, Del. (CN) – Steinway Musical Instruments is selling itself too cheaply through an unfair process to Kohlberg & Co., for $438 million or $35 a share, a stockholder claims in a class action in Chancery Court.
     Named plaintiff Joseph Tillo Jr. the Steinway board of directors breached their fiduciary duties by selling the company “for inadequate consideration and through a flawed process.”
     Kohlberg’s $35 per share offer is a 15 percent premium to the closing stock price before to the offer, according to the complaint.
     Steinway is the modern world’s most prestigious maker of musical instruments. In addition to the famous pianos, its brands include Selmer saxophones, Leblanc clarinets, King trombones, Conn French horns, and Ludwig snare drums. It also sells classical music through its online retailer ArkivMusic.
     Though there is a “45-day “go-shop” period for competing proposals, the Steinway board of directors agreed to “certain onerous and preclusive deal protection devices” that make the Kohlberg deal a “fait accompli and ensure that no competing offers will emerge for the company” Tillo says in the complaint.
     Tillo also claims that the Kohlberg merger “unfairly assures that any ‘auction’ will favor Kohlberg and permit Kohlberg to piggy-back upon the due diligence of the second bidder.”
     With a termination fee of $13.4 million, “coupled with the matching rights and solicitation restrictions,” the complaint adds, Kohlberg is “all but ensure(d) that no competing offer will be forthcoming.”
     Tillo claims that he and the class “will suffer irreparable injury in that they have not and will not receive the highest available value for their interest in Steinway.”
     Steinway recently has reported increasing profits worldwide, especially in China, the largest piano market in Asia. It band and orchestral instruments division has improved revenue as well, according to the complaint.
     Heinrich Engelhard Steinweg established Steinway & Sons in Manhattan in 1853; he anglicized his name to Steinway in 1864, according to the company website.
     The company grew rapidly and expanded its operations in Hamburg, Germany to meet the growing demand for the high-end pianos in Europe.
     Vladimir Horowitz, Glenn Gould and hundreds of other legendary pianists performed and recorded on Steinways.
     Steinway & Sons produced limited edition and art case pianos throughout the company’s history. One piece, the Sir Lawrence Alma-Tadema, sold for a record $1.2 million at Christie’s auction house in 1997.
     The Steinway family sold the company to CBS in 1972. The company’s shares trade on the New York Stock Exchange under the ticker LVB, which stands for Ludwig van Beethoven.
     Tillo is represented by Rigrodsky & Long of Wilmington, Del., and Brower Piven in New York City. He wants the sale enjoined “from soliciting shareholder votes relating to the Proposed Transaction, unless and until the Company adopts and implements a procedure or process to obtain a merger agreement providing the best available terms for shareholders,” and costs.

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