The company struck a deal with Paulson & Co., the investment firm founded by John Paulson, for USD 40 per share.
That topped an earlier USD 35 per-share offer from Kohlberg & Co.
Steinway will discard its sales agreement with Kohlberg and pay a termination penalty of about USD 6.7 million.
The sale price was music to the ears of investors and shares of Steinway Musical Instruments Inc. Jumped nearly 6 per cent in early trading.
Steinway has been in business for 160 years. Its pianos have been a status symbol and a must-have luxury in concert halls for more than a century, but the company suffered during the recession. Sales have increased in the past few years, but have yet to return to their pre-recession levels.
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Industry watchers believe that the recovering economy, coupled with increased overseas demand from places like China, made the company more attractive to private investors. Its shares have recovered with the prospect of a sale, rising 71 per cent this year.
Steinway Chairman and CEO Michael Sweeney said Paulson's offer reflects the attractive value of Steinway's heritage and growth potential, while also providing its shareholders with significantly better returns.
The deal is expected to close in late September.
Steinway, which will become private, valued the sale at about USD 512 million. Paulson will open a tender offer for company shares within the next five days.
Steinway & Sons was founded in 1853 by German immigrant Henry Engelhard Steinway in a Manhattan loft. Steinway was a master cabinet maker who built his first piano in the kitchen of his home in Germany, according to the company.