Fender IPO

Fender Musical Instruments Co filed a document with US financial regulators last Thursday announcing they plan on selling off a stake in the company worth about $200 million in an Initial Public Offering (IPO). They plan to use around half of the proceeds to pay off debt and the other half as ‘working capital’ (putting the money to work in the business). As yet, I’ve seen no reports on how much of the equity will be made available (and hence the implied valuation of the entire company), how many shares this will be or how they will be priced. But it seems clear that based on circa $700 million annual sales, this will be a minority stake.

Fender was founded by Leo Fender in 1946, but he went on to sell the company to the broadcaster CBS in 1965. This period lasted until 1985, when a group of senior Fender execs put together a Management Buyout (MBO). Right now the company is owned by a group of private investors, including some of those who participated in the MBO and a private equity firm (Western Presidio). So this IPO, which will see the company’s stock listed on the NASDAQ exchange, will be the first time that Fender shares will be freely traded and available for non-insiders to purchase.

Apart from the opportunity to own a stake in one of the iconic rock’n’roll companies, this is interesting, because it means after Fender float the shares on the market, they’re going to have to start disclosing a lot more information about their business to investors. So we’ll see quarterly and annual results published, 10k filings etc.

So if you are interested in business, which I am, then maybe it will be possible not only to start evaluating Fender’s performance, but also the guitar and musical instrument industry as a whole. But I’m looking forward to seeing Fender get more transparent and seeing what their filings look like. I may even blog about it