On Nov. 22, Guitar Center announced it has signed an asset purchase agreement to acquire substantially all the assets of The Woodwind & The Brasswind under section 363 of the United States Bankruptcy Code. Under the terms of the agreement, Guitar Center will acquire The Woodwind & The Brasswind's inventory of band and orchestra and combo instruments, accounts receivable, trade names, and certain other intangible assets. The transaction is subject to a number of conditions, including bankruptcy court approval, and is also subject to overbid at a bankruptcy auction expected to be held in January.
Marty Albertson, chairman and CEO of Guitar Center, said, "The acquisition of assets of The Woodwind & The Brasswind, including the Woodwind and Brasswind and Music123 Web sites, will enable us to further expand the already strong combo instrument business at Musician's Friend as well as build out our direct response band and orchestra business. We are excited about the opportunity to broaden our customer base and continue the growth of our direct response business."
The Woodwind & The Brasswind filed for Chapter 11 bankruptcy protection in Indiana on Nov. 21. The proposed asset acquisition agreement was entered into by the Musician's Friend subsidiary of Guitar Center. Under the agreement, only very limited trade obligations and other pre-petition liabilities of The Woodwind & The Brasswind are being assumed.
The demise of the South Bend, Ind.-based dealership, which booked 2005 sales of $136 million (down from $145 million in 2004), appeared to stem from the outcome of a lawsuit involving former minority partners Stephen and Richard Zapf. The Woodwind & The Brasswind had acquired Philadelphia-based Zapf Music Stores, Inc. in 2002, with the former brick-and-mortar business becoming the Internet-only marketer Music123. While Music123 prospered following the deal with sales escalating from $20 million to $58 million annually over the next three years, the relationship between the Zapf brothers and Woodwind CEO Dennis Bamber soured, and both Zapfs were terminated in 2004. The Zapfs then sued, Woodwind countersued, and the court found in favor of the Zapfs in September to the tune of $9 million. In a report published in the South Bend Tribune, Bamber said the bankruptcy filing was necessitated to protect the company from the outcome of the lawsuit. The court filing also cited the costs involved with closing a New Jersey distribution facility and the opening of a new distribution center, as well as an $800,000 expense related to software licensing and upgrades.
Bamber told the newspaper he expects to stay on with the company he founded in 1979, either as an employee or consultant. All of The Woodwind & The Brasswind's approximately 240 employees are expected to also retain the positions with the company.