drathbun Posted July 13, 2012 Share Posted July 13, 2012 OFFERING DETAILS Issuer: Fender Musical Instruments Ticker / Exchange: FNDR / NASDAQ Shares Being Offered: 10,714,286 Shares (7,142,857 Primary / 3,571,429 Secondary) Issue Size: Approx $150MM (Based off of the midpoint of the range) Deal Type: IPO - Fully Marketed Filing Date: Tuesday, July 10, 2012 Filing Range: $13.00 - $15.00 Managers: Joint Books: JPM / Wm Blair Co-Managers Baird / Stifel / Wells Fargo Stabilizing: JPM B&D: JPM Anticipated Pricing: Thursday, July 19, 2012 Shares Outstanding 26,361,833 Shares After the Offering: Company Headquarters: Scottsdale, AZ Use of Proceeds: The Company intends to use the net proceeds to repay a portion of the amount outstanding under the term loan portion of the Company’s senior secured credit facility. Summary: Fender is a leading, global musical instruments company with a renowned portfolio of legendary brands such as Fender, Jackson, Squier, Guild, Ovation and Latin Percussion, which the Company owns, and Gretsch, EVH (Eddie Van Halen) and Takamine which it licenses. The Fender brand in particular is closely associated with the birth of rock ‘n roll and has a strong legacy in music and in popular culture. In 2011, Fender had the #1 market share in the United States in electric and acoustic guitars and guitar amplifiers. In addition, since the acquisition of Kaman Music Corporation (now known as KMC MusicCorp, or KMC), in 2007, the Company believes it has been one of the largest independent distributors of musical instrument accessories in the United States. Fender distributes its products globally in over 85 countries through one of the largest direct-to-retail sales forces in the musical instruments industry in the United States, Canada, Europe and Mexico, as well as through a network of distributors in selected international markets. In fiscal, 2011 net sales, net income and adjusted EBITDA were $700.6 million, $19.0 million and $52.9 million, respectively. Link to comment Share on other sites More sharing options...
j45nick Posted July 13, 2012 Share Posted July 13, 2012 Sounds like the company is already carrying a lot of debt to me. Would need to see the annual report to get a better idea for where things stand. Net sales are a bit of an eye-opener. Who owns this company right now? Link to comment Share on other sites More sharing options...
merseybeat1963 Posted July 13, 2012 Share Posted July 13, 2012 The Suits are working hard to squeeze ..till it is no more. Link to comment Share on other sites More sharing options...
GDC Posted July 13, 2012 Share Posted July 13, 2012 :o :o Link to comment Share on other sites More sharing options...
EuroAussie Posted July 13, 2012 Share Posted July 13, 2012 I would not buy stock in any guitar maker (Taylor possibly excepted) in a recessionary climate. Guitars are as 'dscretionary' purchase as anything out there and would be put off the list as soon as any belt tightening had to happen. Link to comment Share on other sites More sharing options...
ParlourMan Posted July 13, 2012 Share Posted July 13, 2012 I would not buy stock in any guitar maker (Taylor possibly excepted) in a recessionary climate. Guitars are as 'dscretionary' purchase as anything out there and would be put off the list as soon as any belt tightening had to happen. No, certainly not, in a climate of ever-increasing regulation fighting against lower-cost competition who are not bound by the same restrictive clauses is a risk Vs profit nightmare. Lets be honest, units shifted is not going to challenge even mediocre technology products never mind popular ones and there's no "locked-in" value in guitars. Propose this to any investment group these days and you're looking for a new job. On the other hand, valuation is at 20 times the previous fiscal years net income, I've seen worse do reasonably well so it fits into the historical model of IPO's leaning to a slight underpricing... and they're armed with low-cost variants carrying the premium brand name that are not worth faking to take on the emerging markets sector. No planned dividends and the operational gains from debt reduction, the medium term player might see a bit of action here..... pure speculation of course as I've no details. I'm more interested than I was an hour ago..... Link to comment Share on other sites More sharing options...
j45nick Posted July 13, 2012 Share Posted July 13, 2012 Below is an article from a Reuters financial writer this morning on the Fender IPO: Fender’s initial public offering documents read like the 12-bar blues. The iconic maker of guitars favored by the likes of Eric Clapton and Jimi Hendrix is aiming for a rich valuation. But the company has questionable global expansion plans, is loaded with debt, depends on a big shaky customer and generates only pick-thin margins. There’s just too much to make investors fret. The best thing Fender has going for it is an association with rock royalty. It’s also an asset the company hasn’t fully exploited. Less than 1 percent of revenue comes from licensing fees and royalties, leaving room to expand in this area. The IPO will leverage the brand, too. Owning shares of the creator of the Stratocaster is the closest a slew of middle-aged portfolio managers and individual stock-pickers will ever get to Eddie Van Halen or Joe Walsh. But the numbers aren’t anywhere near as cool. While Fender’s revenue increased by 53 percent, to $700 million, between 2007 and 2011, the cost of goods sold and operating expenses grew at an even faster clip. Net profit margins were less than 3 percent last year. And while the newly raised capital is earmarked to pay down some of its $260 million of debt, Fender is loaded with it, at about five times 2011 EBITDA. At the top end of Fender’s $13 to $15-a-share range, it would be valued at approximately $395 million. That’s over 20 times last year’s net earnings while also valuing the whole enterprise at a multiple of about 13 times last year’s EBITDA. Those sorts of figures imply a lot of growth ahead. Fender is counting on Europe for much of it, but economic woes there mean continentals will be stuck playing a lot of air guitar for some time. And some 17 percent of first-quarter sales came from Guitar Center, a retail chain with debt troubles - Standard & Poor’s in May described its liquidity profile as “less than adequate” - and the same private equity owner as Fender. That leaves little for potential stock buyers to riff on beyond Fender’s 65-plus years of history and cachet. Any purchase at the guide price would be worthy of the classic Clapton-enhanced refrain, “While My Guitar Gently Weeps.” Link to comment Share on other sites More sharing options...
ParlourMan Posted July 13, 2012 Share Posted July 13, 2012 But the company has questionable global expansion plans, is loaded with debt, depends on a big shaky customer and generates only pick-thin margins. Net profit margins were less than 3 percent last year. Any purchase at the guide price would be worthy of the classic Clapton-enhanced refrain, "While My Guitar Gently Weeps." Looks like my first instinct was more accurate than my second, haha. I'll climb back from earlier and say, I still believe there's gold in there, but not at that price and not until someone has come in and seriously disinfected the current structuring... The bit I'm most surprised at now that some details are emerging is: Less than 1 percent of revenue comes from licensing fees and royalties, leaving room to expand in this area. Ouch.... but the kiss of death here is: Standard & Poor's in May described its liquidity profile as "less than adequate" Sometimes I love Reuters, hahahaha extremely cutting and dead on the money! Owning shares of the creator of the Stratocaster is the closest a slew of middle-aged portfolio managers and individual stock-pickers will ever get to Eddie Van Halen or Joe Walsh. Link to comment Share on other sites More sharing options...
EuroAussie Posted July 13, 2012 Share Posted July 13, 2012 But you're forgetting they've got Ren to the rescue ! He is da man, Ren will fix everything ...right ? Link to comment Share on other sites More sharing options...
j45nick Posted July 13, 2012 Share Posted July 13, 2012 Looks like my first instinct was more accurate than my second, haha. I'll climb back from earlier and say, I still believe there's gold in there, but not at that price and not until someone has come in and seriously disinfected the current structuring... The bit I'm most surprised at now that some details are emerging is: Ouch.... but the kiss of death here is: The quote about the "less than adequate liquidity profile" refers to GC, which apparently has the same private equity owners as Fender. Hence my original question: "who owns Fender now"? Whenever the stated primary purpose of an IPO is to pay down existing debt, you have to look pretty hard at the company profile and prospectus. Investors are looking more for long-term growth potential than "bail us out of the hole we're in". Link to comment Share on other sites More sharing options...
ParlourMan Posted July 13, 2012 Share Posted July 13, 2012 The quote about the "less than adequate liquidity profile" refers to GC, which apparently has the same private equity owners as Fender. Hence my original question: "who owns Fender now"? Whenever the stated primary purpose of an IPO is to pay down existing debt, you have to look pretty hard at the company profile and prospectus. Investors are looking more for long-term growth potential than "bail us out of the hole we're in". Yeah Nick I got that, it was a reference to it being not one but two holes...... clearly substantial problems at both ends of the stick too given the figures Reuters is mentioning. Link to comment Share on other sites More sharing options...
MissouriPicker Posted July 13, 2012 Share Posted July 13, 2012 I don't have a great understanding of all the stock market stuff, but it kind of sounds like Fender is in trouble. I hope not. There was a report on one of CNN/s business programs that mentioned Best Buy as being in deep water, and they also said some major musical instrument makers were taking another look at their survivability in the economic situation. They didn't mention any name. I hope Fender survives as "Fender." Don't know who owns them, etc., but the name and what it represents to the mainstream public is a positive thing for the music industry. ....... Kind of an eye-opening thread. Link to comment Share on other sites More sharing options...
ParlourMan Posted July 13, 2012 Share Posted July 13, 2012 Now... According to web sources, latest ownership info of GC states it as being Bain Capital, with one very notable partner in Mitt Romney... 1.9B + 200M assumed debt. June 27th 2007. It makes no ref to stakes in FMIC. In annual reports there's normally a base page declaring some basics about ownership and > 20% stakes in other corporations/boards etc... In fact here's the very thing. Supposed Annual report attachment 2011 No idea how legit this is though.... merely scouting Link to comment Share on other sites More sharing options...
ParlourMan Posted July 13, 2012 Share Posted July 13, 2012 ...and the tie to Bain Cpaital Weston Prisidio Bain Capital ties Link to comment Share on other sites More sharing options...
j45nick Posted July 13, 2012 Share Posted July 13, 2012 In annual reports there's normally a base page declaring some basics about ownership and > 20% stakes in other corporations/boards etc... In fact here's the very thing. Supposed Annual report attachment 2011 No idea how legit this is though.... merely scouting PM, that link isn't working for some reason. However, whenever a large stake in any firm involved in an IPO is already held by a venture capital group, I reflexively get cold feet as a small investor. It has nothing to do with Bain capital, but everything to do with the way VC companies often operate. Link to comment Share on other sites More sharing options...
ParlourMan Posted July 13, 2012 Share Posted July 13, 2012 PM, that link isn't working for some reason. However, whenever a large stake in any firm involved in an IPO is already held by a venture capital group, I reflexively get cold feet as a small investor. It has nothing to do with Bain capital, but everything to do with the way VC companies often operate. http://starpas.azcc.gov/scripts/cgiip.exe/WService=wsbroker1/corp-detail.p?name-id=F00479950 Link to comment Share on other sites More sharing options...
MissouriPicker Posted July 13, 2012 Share Posted July 13, 2012 I can't get the link to work. Is there another one? Can't find anything about Bain or Romney with Fender either. Link to comment Share on other sites More sharing options...
ParlourMan Posted July 13, 2012 Share Posted July 13, 2012 doesn't this one work? Just tried it it works for me http://starpas.azcc.gov/scripts/cgiip.exe/WService=wsbroker1/corp-detail.p?name-id=F00479950 Link to comment Share on other sites More sharing options...
j45nick Posted July 13, 2012 Share Posted July 13, 2012 doesn't this one work? Just tried it it works for me http://starpas.azcc.gov/scripts/cgiip.exe/WService=wsbroker1/corp-detail.p?name-id=F00479950 It works. Shows Weston Presidio as the only major shareholder. Link to comment Share on other sites More sharing options...
ParlourMan Posted July 13, 2012 Share Posted July 13, 2012 It works. Shows Weston Presidio as the only major shareholder. Yep, the Bain Capital is for GC, with no mention of FMIC Officers or Directors, but Bain and Weston Presidio do have dealings with each other. Link to comment Share on other sites More sharing options...
vincentw Posted July 13, 2012 Share Posted July 13, 2012 Interesting... Link to comment Share on other sites More sharing options...
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