Explaining Southern California's economy

Fender IPO shows how much private equity loves the guitar world

Les Paul

Mae Ryan/KPCC

Leo Fender gifted this Fender guitar to Les Paul in 1951. The legendary guitar maker has just priced its IPO.

Fender, the legendary guitar maker — around since the 1940s! — filed for an IPO earlier this year and has now priced the offering: between $13 and $15 per share. The company will raise about $160 million, says the LA Times. This is actually less than the company expected to raise when it filed back in March and could reflect an overall pullback in the IPO market, after Facebook's disappointing debut.

The goal for Fender remains the same: pay off debt. It has $246 million, and according to Businessweek, it wants to shed half of that. Boston-based Weston Presidio owns 43 percent of Fender and will see a $50 million payday from the IPO:

Analysts would ordinarily be skeptical of a company that’s going public to help balance its books. Investors prefer companies with clear plans to expand; they don’t usually want to help pay for acquisitions and debts already undertaken. But Fender has something going for it that very few others possess: It’s an iconic brand people truly love.

Fender guitars are the preferred ax of rock royalty (Eric Clapton, David Gilmour, Jeff Beck, Sting, and many others) and they — and the rest of the guitar business — appear to be beloved by Weston Presidio.

The firm, which was once more of venture-capital operation but has moved into buyouts, obviously has its stake in Fender, the world's number one guitar maker.

But it also seems to have a piece of Guitar Center, the world's largest seller of guitars. (Fenders are built in California, while Guitar Center has it corporate headquarters in Agoura Hills.) This is where things get a bit murky. Guitar Center staged what looked like a successful IPO in 1997, but then wound up being taken private by Bain Capital — Mitt Romney's old firm — in 2007. It's now burdened with $1.6 billion in debt. Its former CEO, Larry Thomas, is now running Fender. (Thanks to this post — which contains some salty lingo — from Bang Your Head Guitars for connecting some dots.)

So it looks like Bain and Weston Presidio are teaming up, as they appear to have on other investments, to get Fender out of debt and also maintain a retail channel for the products that the company produces. What's unclear is whether Weston Presidio owns as much of Guitar Center as it used to, or whether it's currently involved with Guitar Center just an investor. I'll update when I know more.

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