Market Overview

Fender Files for IPO


It is one of the most well-known brands in music, alongside the likes of Gibson and Marshall. Many people who have never picked up a guitar and have no intention of doing so know that the Stratocaster and Telecaster guitars are made by Fender, and that Jimi Hendrix used to set them on fire. Fender is synonymous with rock ‘n' roll, with fret-board widdling, solos and riffs.

Overall, though, Fender is a brand synonymous with quality. For many budding players, saving up for and finally purchasing a Fender guitar is an achievement.

On Thursday, it was revealed that Fender has filed for an initial public offering, and is looking to raise $200 million. The filing can be seen here.

According to the Wall Street Journal, this has come more out of necessity than anything else. The company, founded in the 1950s by Leo Fender, is $239.6 million in debt after purchasing Kaman Music in 2007. Fender wants to pay off a chunk of that debt with about half of the IPO.

The IPO certainly makes for fascinating reading, with Fender describing itself as a “leading, global musical instruments company whose portfolio of renowned, music lifestyle brands brings the passion of music to life. Since the founding of our predecessor company by Leo Fender in 1946, we have built a comprehensive portfolio of brands led by the iconic Fender brand and other renowned brands such as Squier, Jackson, Guild, Ovation and Latin Percussion, which we own, and Gretsch, EVH (Eddie Van Halen) and Takamine, for which we are the licensee.”

Of course, few people will need to be skilled on the rich history of the Fender brand. However, the current number of dollars that the company is bringing in will be important. In the IPO, Fender said that its “portfolio of renowned brands, broad selection of quality products, longstanding culture of ongoing innovation and new product development, global supply chain and distribution network and strong consumer loyalty have been key drivers of our strong financial performance. Our net sales grew from $612.5 million in fiscal 2009 to $700.6 million in fiscal 2011, representing a compound annual growth rate, or CAGR, of 6.9%.”

It added that, “Our net income was $10.8 million in fiscal 2009, compared to $19.0 million in fiscal 2011, representing a CAGR of 32.8%. Our adjusted EBITDA grew from $43.7 million in fiscal 2009 to $52.9 million in fiscal 2011, representing a CAGR of 10.0%. See “Summary consolidated financial data—Non-GAAP financial measures” for the definition of adjusted EBITDA and a reconciliation from net income (loss) to adjusted EBITDA.”

It's hard to imagine that Fender won't get what it needs out of the IPO. Even in a struggling economy, it is an attractive brand that will see ups and downs but, as it's track record proves, will always find a way to achieve success.

Brands under the Fender umbrella include Squire (entry level guitars), Sabian (one of the world's largest cymbal designers), Gibraltar (drum hardware), and Jackson (heavy metal guitars).

Posted-In: FenderNews IPOs Best of Benzinga


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