By Tom Gibbs - July 13, 2012 | Tickers: BBY, CBS, COST, FB, VLKAY.PK | 0 Comments

Tom is a member of The Motley Fool Blog Network -- entries represent the personal opinions of our bloggers and are not formally edited.

Following a clearing up of Facebooks (NASDAQ: FB) IPO debacle the stock has recently risen nearly 30% from its post-IPO low there are now a slew of other enterprises with enough confidence to offer their own shares on the public market. In addition to online travel search engine Kayak Software and network-security firm Palo Alto Networks Inc., iconic guitar and other musical instrument manufacturer Fender has recently set the price of its soon-to-be offered shares. Is it worth looking into?

Company & IPO Information

Fender has had an eventful 66-year operating history. Founded in the mid-1940s by Leo Fender, the corporation was eventually acquired by CBS (NYSE: CBS) twenty years later. Put through a series of massive cost cuts and placed alongside other uncomplimentary firms during CBSs acquisition streak (also included the New York Yankees in 1964), Fenders image for quality took a huge hit from a prolonged era of uncharacteristically shoddy products. Fender company management eventually bought out the enterprise in 1985, revitalized the brand, and sold nearly half of the firm to private equity firm Weston Presidio in the early 2000s.

Finally jumping into the public arena, Fender will be selling 10.71 million shares 7.1 million issued by Fender and 3.6 million from Weston Presidios 42% ownership stake. With an estimated per share price target between $13-$15, the corporation hopes to raise as much as $160.7 million and plans to use the majority of the proceeds to pay down its ~$247 million debt burden. Total leverage should be reduced from around 4.7x EBITDA to 3.2x EBITDA (both trailing twelve months) following the debt payment.

Products & Distribution

Fender is obviously known best for its long history of outfitting musicians with quality electric, acoustic, and bass guitars, but the large breadth of its total product portfolio is rather surprising. After acquiring Kaman Music in 2007, the corporation was ample to rapidly expand with the added Jackson, Guild, Ovation, Gretsch, Eddie Van Halen, and Takamine brands. Fenders portfolio of fretted instruments, amps, percussion instruments, and accessories (strings, picks, cables, straps, etc.) now caters to beginner and professional musicians alike with price points from below $200 to the mid-$20,000s.

Fenders finished product is distributed to end-consumers through a variety of channels. Nearly 60% of the corporations sales are derived from its independent channel, which is comprised of more than 13,000 smaller and independently owned music stores. Another 25% is pushed through larger retailers and the corporations own direct channel online. Large, multi-unit musical instrument retailers like Guitar Center (which itself represented around 15.5% of sales over the past three years) and Sam Ash comprise the bulk of this secondary channel, although other big box names including Costco (NASDAQ: COST) and Best Buy (NYSE: BBY), which began rolling out in-store music centers nearly five years ago, do push product to more amateur consumers. The remainder of the corporations sales, especially in emerging markets where Fender has a small but growing presence, are driven by a distributor channel whereby equipment wholesalers sell products to smaller instrument retailers.

Recent Performance

Read more:
Will a Fender Investment Strum a Positive Chord in Your Portfolio?