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Rival walks away to leave Paulson alone at the piano

John Paulson looks set to acquire the American piano maker Steinway Musical Instruments after the private equity firm Kohlberg & Co yesterday waived its right to negotiate with the 160-year-old business after an approach from the hedge fund billionaire.

Earlier this week, Steinway said it had received a $38-per-share bid, valuing its business at about $478m (£283m), which trumped an agreed $35 offer from the private equity firm Kohlberg & Co. Although the company did not name the bidder, the higher offer is understood to have been tabled by Mr Paulson's Paulson & Co fund.

Steinway had given Kohlberg until today to come up with an improved bid matching or topping the higher offer. But in a regulatory filing yesterday, the private equity firm in effect walked away from the bid battle, saying it had waived its right to negotiate further with the Steinway board "with respect to the new proposal and any other proposal at the same or higher price than the new proposal".

The battle to acquire the business underlines the growth prospects in the market for high-end goods, as investors eye the potential for stronger demand from emerging markets in Asia. In addition to Steinway pianos, the business makes a range of other musical instruments, including Bach Stradivarius trumpets.

Buying the piano maker would be an unusual step for the hedge fund, which is best known for betting against toxic mortgages in the run-up to the recent housing crash. The strategy ensured that while most of Wall Street was left struggling to contain losses during the financial crisis, Paulson banked billions of dollars in profits.

In key: A sound is born

A German immigrant called Henry Engelhard Steinway founded Steinway & Sons in a Manhattan loft in 1853, developing the modern piano and building one instrument at a time with his five sons. In 1867, the company came to international prominence when it won the "Grand Gold Medal of Honour" at the Paris Exhibition.

Today, the parent company Steinway Musical Instruments produces a range of instruments, including clarinets and trumpets. Its shares trade in New York under the ticker LVB, after Ludwig van Beethoven.