Steinway Musical Instruments entered into a definitive merger agreement with Paulson & Co Inc on Wednesday. The agreement was for the purchase of the piano maker in a deal valued at USD 512 million. The agreement, called the Paulson Merger Agreement, will make Steinway a privately-held firm once the transaction is completed. The terms of the Paulson Merger Agreement state that an affiliate of Paulson would make a tender offer to buy all the outstanding Steinway common shares in cash at a price of USD 40 per share.

Kohlberg & Company, meanwhile, said it would not be matching the USD 40 per share offer. Kohlberg had earlier offered Steinway USD 35 per share. Steinway already terminated its merger agreement with the company. It also paid Kohlberg a termination fee of USD 6.7 million.

Steinway Musical Instruments Chairman and CEO Michael Sweeney said, "The Company conducted a comprehensive 'go-shop' process resulting in Paulson's offer, which reflects the attractive value of the Company's heritage and growth opportunities. At $5.00 per share more than the offer from Kohlberg, this transaction provides shareholders significant additional value for their investment. At the same time, our employees, dealers, artists, and customers can rest assured that Steinway will be in excellent hands under John Paulson's stewardship."