By Agnieszka Opalka
MBT International, Inc.'s ("MBT") acquisition of Midwest Musical Instruments, Inc. ("Midco"), a distributor of musical instruments, equipment and accessories, significantly solidifies the company's position in the instruments and accessories distribution industry. An American Capital portfolio company since July 1999, Charleston, SC headquartered MBT is a distributor and manufacturer of musical instruments and accessories, audio products and professional stage lighting. MBT's combination with Midco results in significant synergies for the combined entity and places it in an excellent position for future growth.
The Midco combination closed on May 5, 2003. American Capital Strategies (Nasdaq: ACAS) provided $7.5 million in add-on acquisition financing, with additional financing from LaSalle Bank. Post transaction, Midco will become a sister company of MBT International and a wholly-owned subsidiary of MBT Holdings Corporation, an entity in which American Capital has majority ownership. With this financing, American Capital has invested over $1.7 billion in more than 70 companies since its 1997 IPO. For more information about American Capital's portfolio, go to http://www.americancapital.com/our_portfolio/our_portfolio.cfm
"Our ongoing relationship with American Capital has enabled MBT to add value, enhancing its strong position within the musical instrument and accessories distribution industry," said MBT CEO Dan Mahoney. "With this acquisition, we will have a significantly larger distribution infrastructure, allowing us to reach more customers with greater speed and efficiency, and providing them with improved service to meet their demands."
MBT's strategic acquisition creates a strong competitor in an industry where economies of scale are significant. Following the transaction, the combined entity will have broad geographic reach through its six distribution centers and an enlarged customer service and direct field sales team, a significant competitive advantage. In addition, by combining the efficient operations of both companies, cost savings in the form of shipping and purchasing savings are expected.
"Midco is a perfect fit with MBT, and we expect the combination to result in significant synergies in terms of cost savings and revenue growth," said American Capital Principal John Thornton. "Both companies have large, broadly diversified and complementary customer bases, thereby creating cross selling opportunities. We are confident in the future growth and success of the combined entity under the leadership of strong and talented CEO Dan Mahoney, who has extensive experience in acquisitions, successfully integrating company cultures, operations and practices."
Founded in 1979, MBT is a major distributor of musical equipment and accessories, operating out of three facilities in South Carolina, Nevada and Indiana. MBT's proprietary products include Hondo� and J.B. Player� guitars, RMS� PA systems and amplifiers and MBT lighting and sound products. Pictured at left is a Hondo� electric guitar.
Headquartered in Effingham, IL, Midco is a distributor of guitars, percussion products, electronic music equipment and a wide array of music accessories. Founded in 1949 as a retail store, the company established its successful wholesale music operation in 1965, and has evolved into one of the nation's top musical instruments and accessories distributors. Through its three facilities in Illinois, Texas and Virginia, Midco distributes a variety of musical instruments and accessories both under exclusive and non-exclusive arrangements, as well as proprietary brands, including J Reynolds� guitars and Percussion Plus� drums and drum accessories, that are manufactured by third parties in the Far East.
The musical instruments and accessories distribution industry is mature and stable, with estimated revenues of approximately $4.2 billion. While the industry is highly fragmented, recent years have experienced the emergence of large retail chain stores, resulting in consolidation within the industry, a favorable trend for the music distributors who provide the link between the instrument and accessory manufacturers and retail strores. The combined company supplies many of the top U.S. music retailers, including The Guitar Center, Sam Ash Music Corp., Brook Mays Music Co., George's Music Group and Hermes Trading Co.
With an expanded product line, a well-established and diversified customer base and an experienced management leader, MBT's strategic acquisition of Midco places the combined entity in an excellent position to rock and roll into the future.
