With KKR’s attempted takeover of Gibson nixed, what’s next?
Disagreements over the terms of a new deal between Gibson and the private equity firm have surfaced, hindering future plans for the debt-saddled music giant.
Gibson CEO Henry Juszkiewicz smashing an SG at a press conference in 2010. Image: Shahar Azran / WireImage
Gibson yesterday announced more news about its uncertain future—and it could mean a change in ownership is now on the cards.
The beleaguered music giant revealed that it has been in talks with private equity firm KKR Credit Advisors. Gibson had intended to reduce its reportedly $560 million debt burden by converting some of its debt into a controlling stake in the company to KKR, which is already a creditor.
However, those negotiations reached an impasse. Both companies were “significantly divergent in their views regarding the appropriate consideration for the various parties involved,” according to Gibson’s statement.
It marks a different strategy for the cherished company that’s synonymous with rock ’n’ roll. The disclosure of KKR’s engagement suggests Gibson CEO Henry Juszkiewicz is now open to selling a controlling stake in the company in order to save it from bankruptcy. In the statement, Gibson projected between $60 to $65 million in EBITDA from its music instruments and pro audio businesses. In other words, it’s still pretty great at selling guitars.
But despite the deal with KKR seemingly in tatters, the Nashville-based company also disclosed that it is in discussions with other parties to either refinance its bonds or, more importantly, take control. But time is ticking: Gibson only has until August before creditors come knocking for the $560 million.
“It is accurate to say bankruptcy is a possibility in the sense that our bonds expire,” Henry Juszkiewicz told The New York Times. But at the same time, he remarked that some of the bondholders have aspirations other than being repaid: “They are more interested in owning the company. That’s an ownership play.”
So what does it all mean for Les Paul devotees?
If an investor were to swoop in, it would almost certainly herald a shift in Gibson’s direction, for both its core business as well as many of the world-famous brands in its portfolio such as Epiphone.
KKR’s interest in Gibson echoes a takeover of another iconic music brand: Fender. In 2013, TPG Growth and Servco Pacific bought a controlling stake in the heritage company and spent the better part of the year laying down a blueprint to make Fender friendlier to a contemporary audience.
For example, in late 2013, Fender started to sell Strats and Teles directly to guitarists via its website. And, in 2015, the new owners hired a future-minded CEO in Andy Mooney, who has already implemented several digital-first strategies such as the launch of Fender Play.
And should a change in ownership at Gibson lead to better products and services, then as fans, we’ve got a whole lot to look forward to.