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Bidding War? Conn-Selmer Vies for WWBW

In an objection to Musician’s Friend’s bid to purchase Woodwind & Brasswind, Conn-Selmer has revealed that it has also submitted a purchase agreement to Dennis Bamber, Woodwind’s owner, to acquire the assets of the Chapter 11 retailer. The position of stalking horse bidder, or lead bidder, is now up to the judge.

According to an objection filed Dec. 5 by Conn-Selmer and Steinway Musical Instruments, Conn-Selmer submitted an offer $40.5 million on Dec. 1. That bid is $3.4 million higher than Musician’s Friend’s bid, which was submitted Nov. 22.

In its objection, Conn-Selmer said that it inquired about purchasing Woodwind & Brasswind on Nov. 21, the day of the Chapter 11 filing. Allegedly, a representative for Bamber said he would prepare a “sale book.” The sale book didn’t arrive until Nov. 27.

Steinway still sent its offer, but, court documents said, Bamber declined the offer to go with that of Musician’s Friend.

That’s why Steinway has filed the objection, which highlights two things. One, its offer is higher and already on the table. Two, if Musician’s Friend is the lead bidder, and someone outbids its offer, Musician’s Friend will get a “break-up” fee of $1.14 million. In light of these factors, Steinway said it would be in the “best interest of the estate” to make it the lead bidder and make $40.5 million the bidding floor.

In a response to Conn-Selmer’s objection, filed by Musician’s Friend on Dec. 6, Musician’s Friend alleged that Conn-Selmer is not bidding in good faith.

That document said that Dana Messina, CEO of Steinway, Conn-Selmer’s parent company, contacted Marty Albertson, CEO of Guitar Center, Musician’s Friend’s parent company, expressing concern that Conn-Selmer’s unsecured claim ($3.034 million) would not be fulfilled by the Musician’s Friend bid. Messina said he intended to overbid, but would discuss alternatives as long as the claim could be repaid in full.

Musician’s Friend also responded by saying that it’s break-up fee of 2.9 percent is well within the average, which is 3.3 percent.

Bamber’s take? “I signed an agreement with Guitar Center, and it’s not in my hands,” he told the South Bend Tribune. “I'm not taking sides one way or another.”

A hearing has been scheduled for Dec. 15.

Objection #2
On the same day Conn-Selmer filed its objection to the bid, the Official Committee of Unsecured Creditors also filed a limited objection. In the document, the committee said that, among other concerns, the current bid and bidding procedures has been rushed through.

According to the objection: “In short, the debtor has failed to satisfy its burden of proof to establish that the proposed sale is in the best interests of the estate, and the debtor is moving far too quickly and there are far too many interrelationships among the debtor, its insiders (and their affiliates), the proposed stalking-horse bidder [Musician’s Friend] and the debtor’s prepetition lender and interim debtor-in-possession financing lender, LaSalle Bank National Association, for the Committee simply to conclude that an expedited sale process, as proposed, is the correct path for this estate.”

The committee also objected to the size of break-up fee. Although, at 2.9 percent, it's not too high at the moment, the document said that the final price could be decreased by as much as $3 million, which would make it too high.

The committee is asking that the court establish bidding procedures that are fair and that will encourage competitive bidding. It is also asking that it have a role in the sale process and that Bamber must take additional time to negotiate for lead bidder. Conn-Selmer’s Judy Schuchart is currently the acting chairperson of the committee.

In response to the timing of the agreement between it and Bamber, Musician’s Friend listed four reasons why it is the best interest of Woodwind & Brasswind: It will help retain employees, Musician’s Friend’s management will boost fulfillment rates and thus retain customers, a new owner will allow the company to purchase inventory, and the debtor’s bank has only been patient throughout these hearings because of the expeditious sale agreement.