Bain Capital buyout a boon to Guitar Center

Guitar Center Inc., parent company of leading online retailer of musical instruments Musician’s Friend Inc., has been sold to private equity firm Bain Capital Partners LLC. Bain will pay $1.9 billion in cash and assume $200 million in debt, for a total purchase price of $2.1 billion.

Bain is paying $63 per share, a 26% premium over Guitar Center’s closing share price yesterday. There has been speculation the company would be sold for the past few weeks, after the appearance of news stories saying the company had hired investment bank Goldman Sachs & Co. to auction off the company. Guitar Center confirmed today that Goldman Sachs had conducted the auction.

Guitar Center’s Musician’s Friend subsidiary is No. 48 in the Internet Retailer Top 500 Guide, and the top online retailer of musical instruments. Musician’s Friend had nearly $252 million in online sales in 2006, up 14% from $220 million the year before.

Guitar Center also launched GuitarCenter.com last year as part of its multi-channel strategy. The company operates 210 Guitar Center stores and another 95 stores that specialize in band instruments for sale and rental, targeting band directors, college professors, and students.

“As the leading retailer of musical instruments in the U.S., Guitar Center enjoys great brand recognition among musicians nationwide, a loyal customer base and a track record of significant growth,” says Jordan Hitch, a managing director at Bain.

Guitar Center chairman and CEO Marty Albertson called the deal “a strong validation of the company’s accomplishments over the years as well as our future growth prospects.” He added that “Bain Capital has a successful track record and significant investment experience in the retail industry.”

Boston-based Bain, which says it has about $50 billion in assets under management, has invested in such retailers as Toys “R” Us, Michaels Stores and Burlington Coat Factory.