Guitar Center Agrees to Be Acquired By Private Equity Firm for $1.9B in Cash

Guitar Center Inc., the largest U.S. musical instrument retailer, said Wednesday its board had accepted a $1.9 billion cash buyout offer from a private equity firm.

The deal with affiliates of Bain Capital Partners LLC came amid speculation that a buyout was in the works. Guitar Center had hired investment bank Goldman Sachs & Co. to auction the company.

Bain Capital offered to pay $63 per share, which represents a premium of 26 percent over Guitar Center's closing price Tuesday of $50.06. The purchase price is based on the company's 30.2 million shares outstanding at the end of March.

Under the agreement, the buyers will also assume about $200 million in debt, pushing the total transaction value to $2.1 billion.

The deal, which requires approval by Guitar Center shareholders, is expected to close in the fourth quarter.

Guitar Center shares climbed $9.92, or 19.82 percent, to $59.98 Wednesday.

Marty Albertson, Guitar Center chairman and chief executive, said in a statement that the deal "is a strong validation of the company's accomplishments over the years as well as our future growth prospects."

Last month, Goldman Sachs analyst Matthew J. Fassler said the retailer was "optimally positioned for a sale, given its dominant competitive position and capital allocation opportunities, as well as a savvy shareholder base."

Guitar Center began in 1959 when former car salesman Wayne Mitchell purchased a small appliance and home organ store in Hollywood. In 1964, Mitchell converted a movie theater next door to his Hollywood shop, and opened the first Guitar Center on Sunset Boulevard.

The company, which now has more than 210 stores, went public in 1997. The stock has more than tripled since its initial share sale, and revenue last year was $2.03 billion, compared with $296.7 million in 1997.

This year, Guitar Center bought musical instrument retailer Woodwind & Brasswind for about $30 million.

Guitar Center posted first quarter profit of $17.2 million, a 9.7 percent increase from a year earlier, as sales climbed 14 percent to $534.5 million.