John A. Paulson, a hedge fund billionaire, already owns three Steinway & Sons pianos, together worth tens of thousands of dollars.
But Paulson, in investing parlance, was looking to increase his exposure. On Wednesday, his firm, Paulson & Co., agreed to buy the company that makes the pianos, Steinway Musical Instruments, for $512 million.
The move raised eyebrows both in the world of music and on Wall Street. Paulson made billions in 2007 largely with a bet against the housing market. His firm specializes in mortgages, gold and other financial assets. And while Paulson & Co. owns stakes in companies, it has never before bought one outright.
But Paulson said that the calculation was rather simple he loves the pianos. "I've always been enamored with the product," Paulson said in an interview Wednesday. "You have Mercedes in cars, and top brands in every other area. But no one has such a high share of the high end."
While he got what he wanted within days of making his first move, a bidding contest for Steinway broke out behind the scenes. In July, the private equity firm Kohlberg & Co. said it had reached an agreement with Steinway to buy it for $35 a share. Kohlberg bowed out Tuesday in the face of a bid from Paulson of $38 a share.
That same day, though, an additional challenger emerged Samick Musical Instruments of South Korea, which is Steinway's biggest shareholder. Samick offered $39 a share.
But on Wednesday morning, Steinway pronounced Paulson the winner after his firm had increased its bid to $40 a share.
"We're fortunate in this case that John is a personal fan of our product," Michael T. Sweeney, Steinway's chairman and chief executive, said Wednesday.
In the world of music, Steinway is not just another company. Founded in 1853 by a German immigrant in Manhattan, Henry Engelhard Steinway, and his three sons, Steinway pianos became an icon in concert halls and living rooms.
Steinway spends almost a year building each grand piano, and the result, its devotees say, is an unmatched quality of sound.
Paulson said his strategy centers on expanding Steinway's reach around the world. He is also betting that the improving economy and strengthening housing market will help the sales of Steinway pianos, a luxury item that proved to be out of reach in recent years, even for its usual wealthier clientele.