Steinway attracts takeover interest from China conglomerate

Hong Kong

STEINWAY Musical Instruments Inc, the legendary piano maker controlled by US hedge fund billionaire John Paulson, has attracted takeover interest from China Poly Group Corp, people familiar with the matter said.

The state-owned conglomerate is in the early stages of considering an offer for Steinway, the people said. Other suitors may also emerge for the business, according to the people, who asked not to be identified because the deliberations are private.

Steinway should be able to fetch a high valuation given that the company may reach 30 to 40 per cent annual sales growth in China, according to Shaun Rein, founder and managing director of the China Market Research Group.

A Chinese company like Poly Group could help improve Steinway's distribution network in the country, which has been weak so far, he said.

"Steinway has massive potential in China as consumers love the brand," Mr Rein said on Tuesday.

"As Chinese middle-class families get wealthier, they'll be willing to spend on a luxury piano for their kids as they see music as a key part of their education. And nobody beats Steinway on that."

Poly Group started in 1992 as a supplier of defence equipment for the Chinese military. The conglomerate now has operations spanning explosives manufacturing, real estate, mining, cinemas and the arts.

Hong Kong-listed unit Poly Culture Group Corp owns China's biggest home-grown auction house, in addition to running a chain of theatres that have hosted musicals like Cats and performances by the likes of the London Symphony Orchestra.

Mr Paulson's New York-based investment firm Paulson & Co agreed to acquire Steinway in 2013 for about US$512 million, beating rival bidders that included South Korea's Samick Musical Instruments Co.

The piano maker that gave the company its name was founded in 1853 by German immigrant Henry Engelhard Steinway in a Manhattan loft on Varick Street, and over the following decades became a brand recognised worldwide.

In March, it opened a new Asia-Pacific headquarters in Shanghai.

Mr Paulson has a net worth of US$5.5 billion, according to the Bloomberg Billionaires Index.

An official at Poly Group and a representative for Paulson & Co declined to comment. A representative for Steinway didn't immediately reply to queries outside regular US business hours. BLOOMBERG