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Hi all,

since there has been some dispute in the past over the relation between Samick and Bechstein, some people might be interested in the press release from Bechstein of today:

http://www.bechstein.de/download/PM_Beteiligungserhoehung_Kuepper-Schulze_02.02.06a.pdf

Since it is available in german only, I'll summarize its main points:

- in 2002 the cooperation between Samick and Bechstein started, whereby the Schulze family, the majority shareholder until 2002, traded 57% of the Bechstein shares for a corresponding part of the Samick shares.
- Due to capital increases of Bechstein in 2004 and 2005 the fraction of Samick was reduced to 39%, while increasing the free float
- On February 1, 2006, the Schulze family acquired half of the Bechstein shares held by Samick.

The current status is that the Schulze family is now the majority share holder with 25% of the shares. Samick now holds 19% of the Bechstein shares. The strategic alliance between the companies will be continued.

Interestingly, words such as "Zusammenarbeit" (cooperation), "Allianz" (alliance), "Partnerschaft" (partnership) are all printed in boldface, probably to emphasize that rumours of a more asymmetric relation between the companies are not true...

SR,

Any thoughts re what "strategic alliance" might mean with respect to design or manufacturing?

The press release does not say much about it. It says that, in this alliance, Bechstein is responsible for "product development" and "market development" in Europe, whereby Samick is responsible for "subcontractors, network partners in asia and sales in Asia, Oceania, and the US". The press release also mentions a new factory in Shanghai called "Berlin Bechstein Piano (Shanghai)", which is supposed to produce pianos for the chinese market.

What this really means is open to interpretation, I guess. I don't want to speculate about it, but I am sure that certain people will try to twist these sentences to say what they want to hear

So, in the 'piano lovers/buyers/owners' terms...

WHAT DOES THIS ALL MEAN?

and WHY do we, or should we care who owns the stock?

I just don't understand how it affects us all.

Please enlighten us.

Roberta

The surprising thing is that at one time Samick was the majority shareholder of Bechstein--while people (not affiliated with Bechstein) were at that very time posting right here that Samick wasn't!

Roberta,

There has been a fear in previous thread that Bechsteins might be built somewhere other than Germany, say Korea.

Just as a purchase of BMW by Hyundai might get the attention of some luxury car buyers.

So Bechstein is definitely back in German control.

I think in principle no piano lover needs to care about it. However, past disputes over the Samick-Bechstein relation in this board show that it is obviously important to some people.

SR,

Thanks for the update. Looks like Bechsteins will retain a distinctive character---and that's good news for us all.

The stock ownership is not really significant. What DOES make a difference is the advantages of the alliance.

When Samick was in the design phase for the new Pramberger line, Bechstein engineers worked with Rick Balddison, Andre Bouldec and Phil Glenn. The "platform" for the new JP Pramberger Series grands was made using Bechstein's engineer's designs. Samick purchased their new multi-spindel routers to be able to mass-produce rims parallel to the Bechstein. This is one of the reasons that the JP grand sizes are now the same as Bechstein's.

Now, before I get jumped on, the JP Pramberger is NOT a Bechstein, nor is it the same design, nor is it in the same league. The Samick brands are mass-produced while Bechstein is handmade. Bechstein and Samick are working together as the piano industry evolves. They are assisting each other in new designs and production methods.

This benefits both companies and hopefully the consumer as well.

How does having 25% make the family the majority shareholder. we do not have enough information to conclude this.

The likely scenario may be:

bank(s) 56% (control)
family 25% (significant minority)
SMC 19% (significant minority)

Bank(s) control the Supervisory Board

I am not sure what is inferred by "free float"in this context. But it is not the case so far as I am aware that many shares are in public hands.

There is an oddity though because the Schulz family previously claimed to own 9.8%. If they have now acquired 19% from Samick (half of Samick's share, leaving them with 19%) then this suggests that the family shareholding should have risen to 28.8% not 25%. I wonder if the difference of 3.8% has ended up with the banks as a financing cost. Intriguing.

Roberta - it probably does not matter to the general public as long as Bechstein continues to have enough capital, and particuallry working capital, to provide continuity for guarantees etc. It only matters to those of us who take an interest in the financial manouverings and consolidation opportunities in the musical instrument manufacturing business.

Personally I happen to think that further consolidation of so called Tier 1 and 2 manufacturers is necessary for their medium term survival. I am taking bets on how this manifests itself.

I also think it is a good thing for Bechstein as a brand, for the Schulz family to gain a larger share than the less than 10% they had before.


Kind regards

Adrian

That's easy to answer: The majority shareholder is the party which owns most stocks. It has nothing to do with holding more than 50%. You can be a majority shareholder with only 0.1% of the shares. Maybe there are a few other parties which hold substantial parts, but I think the majority of the rest is free float. This does not mean "owned by bank". I am proud to say that I am holding about 0.02% of the Bechstein shares And I don't intend to give off my vote to the bank

The companies could be integrated more or less successfully - and evaluating whether a partnership of this kind is successful is a complex question. It goes way beyond the bare facts of the stock ownership.

Software Research - your assumption is not necessarily correct, it depends where the 56% lies. The Supervisory board is controlled by the banks presently.

As my email above makes clear, who cares who has the most shares. What matters is who has control of the key strategic and financing decisions within a company.

A

No. If the banks would own 56% (or any number greater than 25) they would be the majority shareholder. The banks sell the shares to mortal individuals like me but this does not make them an owner.

Of course a majority shareholder does not necessarily exerise full control. That's a different thing. But the term "majority shareholder" is clearly defined.

From what I've heard I do not believe that "integration" of the companies is a goal of either. I would say that a sharing of information and technologies between two companies that do not compete against each other is a more accurate description.

Yes, but the improvements being made by Asian manufaturers should have everybody else shaking in their boots. That Shanghai facility seems like an astute near-term move. Long-term, I think that all non-Asian manufacturers will have a difficult time sustaining in-country manufacture, tho the Czechs and Estonians might be able to hang in until Asian labor rates stop giving them such an incredible advantage.

Everyone else IS shaking in their boots!!!

The Japanese took over a huge percentage of the market in the 70's - 90's. Now it is China and Indonesia making their move.

The cost of labor IS an incredible advantage, and even worse, they have good natural resources that can give them a materials-advantage as well!!!!

Ooops, forgot about one. And I really want to see Baldwin survive, too!

SR:
With all due respect, this is not the case. With 0.1% of the shares, you may well be the largest single shareholder, or 'principal' shareholder, but you are not the 'majority' shareholder.

A) Principal shareholder = larger proportion of the issued shares compared to any other single shareholder.

B) Majority shareholder = more than 50% of the issued shares.

In that press release "Hauptaktionär" means 'principal' shareholder(A), not 'majority' shareholder(B). The German for a majority shareholder would be "Mehrheitsaktionär."

Best regards,

- Michael B.

Actually I looked this word up in a dictionary ( http://dict.leo.org ) before writing it
In the dictionary, the translation of "Hauptaktionär" is either "principal shareholder" or "majority shareholder". If the latter is actually not a correct translation then I apologize.

SR:
No problem, you were just a victim to a slightly inaccurate and over-generalised dictionary. As someone who works everyday in a language which is not my mother tongue (and frequently get called upon to converse/negotiate in two others... why can't everyone just speak English? ), I make similar slips quite regularly too . And in this case I was home turf as I am responsible for financial management as a day job, hence being keen on making the distinctions.

For future reference this online dictionary seems a bit more precise:

Mehrheitsaktionär
Hauptaktionär

Best regards,

- Michael B.