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Fender Plans to Jam Out an IPO

The iconic guitar brand is much more than just guitars


Leo Fender, founder of the Fender Electric Instrument Company, brought to life the Telecaster — the first commercially successful solid-body electric guitar. It would help make Fender an iconic brand for the rock ‘n’ roll movement and bring the guitar brand into the pop culture mainstream.

Now, Fender is aiming for the U.S. market mainstream.

The company just announced plans to come public, with JPMorgan (NYSE:JPM) as the lead underwriter and “FNDR” as the proposed ticker. Fender plans to list on the Nasdaq.

Leo Fender started the Fender Electric Instrument Company in Fullerton, Calif., in 1946, and created the Telecaster a few years later. But in the mid-1960s, Leo Fender sold his company to Columbia Records, which now is a part of Sony (NYSE:SNE). Then in 1985, Fender was spun off to a group of managers.

Last year, Fender held the No. 1 position in terms of revenue for electric, acoustic and bass guitars in the U.S. The company has a wide assortment of brands other than Fender, such as Squier, Jackson, Guild, Ovation and Latin Percussion. It also has license rights to Gretsch, EVH (Eddie Van Halen) and Takamine. Not to mention, its guitars have been used by some of the world’s greatest artists, like Jimi Hendrix and David Gilmour.

Still, Fender continues to focus investments on innovative product development. For example, in January the company launched its Fender Select line, which is a premium, hand-crafted production guitar. The Select line should help to boost margins as well as lead to a spike in upgrades.

And Fender is more than just about guitars. In 2007, the company purchased Kaman Music Corporation, which is one of the largest independent distributors of musical instrument accessories.

As a result, Fender now is a sizable business. In 2011, revenues came to about $700 million up from $618 a year earlier, and adjusted EBITDA was around $53 million.

A key growth driver has been international markets, which currently account for 46.7% of net sales. But Fender believes it still has plenty of potential to enter more new countries.

Fender also is getting more aggressive with licensing its brands. And in fact, the company might get traction beyond music, such as for apparel, consumer electronics, mobile and bags. Fender already has put together co-branding deals with Apple (NASDAQ:AAPL), Hard Rock Cafe International and software company SAP (NYSE:SAP).

So in light of its global brands — as well as growth opportunities — Fender should continue to be a top-notch player in the music business. Expect investors to line up for the IPO when it hits the markets within a couple months.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “The Complete M&A Handbook”, “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli or reach him via email. As of this writing, he did not own a position in any of the aforementioned securities.

Article printed from InvestorPlace Media, http://investorplace.com/ipo-playbook/fender-plans-to-jam-out-an-ipo/.

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