Buyers Include Guitar Firm’s Management Group : CBS Will Sell Fender Musical Unit

CBS Inc. said Friday that it has agreed in principle to sell its troubled Fender Musical Instruments unit--whose electric guitars have been a mainstay of today’s popular music--to outside investors and Fender employees, led by Fender President William C. Schultz. The amount of the cash transaction was undisclosed.

Schultz, 58, who will become chairman and chief executive of Fullerton-based Fender, said the sale is expected to be completed by March 4. Many of the investors, he said, are key management officials at Fender. Other longtime Fender employees, he added, will also be given an opportunity to purchase stock.

The proposed sale puts to rest speculation that Fender, a pioneer in modern electric music that has suffered in recent years from foreign competition and a shrinking guitar market, might be sold to a Japanese company or go out of business.

“This is an opportunity to keep a very viable and legendary name alive in the industry,” said Schultz, whom CBS recruited from Yamaha in 1981 to try to turn Fender around.

Work Force Cut

Schultz, acknowledging that Fender has lost money in the last three years, said he expects the company to make a “substantial” profit this year by continuing to shift guitar manufacturing overseas and to cut overhead at home.

Since 1981, Fender’s work force has shrunk to 275 from 700. And Schultz said the prospective new owners intend to further reduce the staff to about 110 employees, with layoffs occurring over the next 30 days.

Schultz said that, in addition to the Fender guitar, which is the company’ leading product, the investors also have agreed to purchase all the other existing Fender product lines, including Rhodes pianos, Rogers drums, Fender strings, amplifiers and public address systems, and Chroma and Polaris synthesizers.

He said individual investors and employees will own at least a 51% interest in Fender, and a venture capital firm that he would not identify will have an option to buy up to 49%.