Fender hopes IPO will rock

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(MoneyWatch) One of the most important technology companies of its time is preparing to go public: Fender Musical Instruments, maker of the iconic Stratocaster and Telecaster guitars.

The company, which was launched in 1946, on Thursday registered with the SEC to raise as much as $200 million in an initial public offering of stock. It plans to use half the proceeds to repay outstanding debt, while the rest will be for general corporate purposes, working capital, and acquisitions.

Unlike some companies that have recently staged successful IPOs, such as Yelp (YELP), Fender is profitable. For its fiscal-year 2011, the company had net income of $19 million on revenue of $700 million, up from earnings of $10.8 million and sales of $612 million two years earlier.

Maker of Fender guitars files for $200M IPO
Fender's Form S-1 filing with the SEC

In its IPO filing, Fender said it expects several long-term trends in the roughly $16 billion global instrument market to support the company's growth. Improved manufacturing techniques are making it easier to make high-quality but affordable guitars. The proliferation of online software for creating, distributing, and sharing music also is driving consumer interest in the guitar. And Fender sees vast new markets opening up for its products, including China, India, and Indonesia.

The company said the industry remains highly fragmented, with instrument makers ranging from small, independent players and print publisher to large multinational corporations and technology companies. That leaves Fender an opportunity to expand through mergers, acquisitions, and strategic partnerships.

Fender's greatest asset, of course, may be its enduring cool. Its instruments have been used by a long line of renowned guitarists and other musicians, including Jimi Hendrix, Stevie Ray Vaughn, Eric Clapton, Jaco Pastorius, Jeff Beck, and David Gilmour. The company said in its filing:

Our brands are used by many of the world's best known musicians and groups, both current and historical. We believe that the use of our products by these professional musicians, whose popularity and actions often influence consumers, establishes the authenticity of our brands so consumers aspire to own our products and are inspired to create their own music using our products.

Perhaps Fender's greatest obstacle to making beautiful music as a public company is the European debt crisis. A large portion of its sales derive from the region, so a prolonged downturn in Europe could dent sales.

  • Alain Sherter On Twitter»

    Alain Sherter is an award-winning business journalist who has written for The Deal, MarketWatch and Thomson Financial Media.

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