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Guitar Center Is Expected to Buy Retailer of Instruments to Schools, Novice Players

Times Staff Writer

Guitar Center Inc. plans to buy privately held Music & Arts Center, a retailer of musical instruments to schools and novice musicians, for about $90 million in cash, sources familiar with the deal said Tuesday.

The purchase wouldn’t be large in dollar terms, but it would be of strategic importance: It would give Westlake Village-based Guitar Center a bigger presence in the sale and rental of instruments to beginners, classrooms and school marching bands.

A Guitar Center spokeswoman declined to comment, and executives at Music & Arts Center couldn’t be reached late Tuesday. But the sources said an announcement could come as early as today, when Guitar Center releases fourth-quarter financial results.

The rapidly growing company is the nation’s largest retailer of guitars, amplifiers, drums and other musical instruments, with annual sales exceeding $1.3 billion. Most of that growth has come from its core 138 Guitar Center stores in 33 states.

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Now the company wants to bolster its small American Music division, which operates 19 stores that sell and rent instruments to students, music teachers and band directors. It would be merged into Music & Arts, and the business would take the Music & Arts name, people familiar with the deal said.

Music & Arts, a 53-year-old company based in Frederick, Md., has 60 retail stores and seven educational centers. Most are east of the Rocky Mountains; it doesn’t operate in California. Its annual sales are about $80 million.

Guitar Center also might use Music & Arts as a springboard for acquiring other retailers in the educational-instruments market, the sources said.

That market is highly fragmented with more than 7,000 U.S. stores, most of them small and employing outdated marketing and back-office technologies, they said.

Thus, they said, the market is ripe for consolidation by a larger operator like Guitar Center.

Guitar Center, which employs about 5,000 people, has been on a roll recently. The company has frequently posted double-digit gains in quarterly revenue, earnings and sales at stores open at least a year.

The company’s stock has tripled in price over the last two years. It closed Tuesday at $57.25, down 38 cents, on Nasdaq.

Much of Guitar Center’s success reflects the rapid growth of digital home-recording equipment that has enabled musicians to achieve near-professional recordings at relatively affordable prices. That trend, in turn, has generated more demand for Guitar Center’s instruments, analysts have said.

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