BDT Capital Partners LLC, the largest shareholder of Weber Inc. (WEBR), has offered to buy the shares of the Chicago-based maker of grills and barbecues that it doesn’t already own for $6.25. 

The non-binding acquisition proposal from the BDT & Co. affiliate was made on Oct. 25. The shares gained more than 30% on the news. 

While the take-private offer from Byron Trott’s merchant bank -- Byron Trott was a Goldman Sachs Vice Chairman until leaving in 2009 to start BDT & Co. -- would seem to be a case of “a bird in the hand is worth two in the bush,” for the struggling stock, the fact Weber shares are trading more than 50 cents above the offer price as I write this on Wednesday suggests investors sense another offer could be in the making. 

Whatever happens, Byron Trott still ought to make money on his 2010 investment in the iconic brand.   

Weber just got grilled by Byron Trott. Here’s why.

Trott’s Association With Weber Goes Back to 2010   

In December 2010, BDT Capital Partners agreed to acquire a controlling stake in Weber-Stephen Products, the parent of Weber Grills. While no terms were revealed at the time of the transaction, SEC documents suggest that BDT paid for its stake with $65 million in equity and $150 million in debt.  

What’s less clear is how much control BDT gained through the transaction. TheMiddleMarket.com suggests that it did the deal in partnership with the Stephen family. 

George Stephen Sr. created the first Weber Grill in 1952 while working in sales at Weber Brothers Metal Works. James Stephen, George’s son, was CEO when BDT acquired control. 

Fast forward to Weber’s August 2021 IPO. The company sold 17.9 million shares at $14. They gained 18% on the first day of trading, but they’ve been downhill since, hitting a low of $4.82 in October. 

Page 102 of its IPO prospectus shows that the Pre-IPO LLC Members' total consideration for the 269.32 million shares purchased was $13.55 million, or $0.05 a share. The IPO investors bought 6% of the company for $250 million, valuing the entire equity at $4.17 billion. Today, Weber’s market cap is $1.94 billion after Byron Trott’s take-private offer.

Before the IPO, BDT Capital Partners and related entities owned 78.6% of the company’s stock. After the IPO, it had an economic interest of 57.8% and held 73% of the voting power. 

Based on its 57.8% economic interest, its stake was worth approximately $2.4 billion immediately following its IPO. Today, it’s worth $1.1 billion.

That’s still considerably more than the estimated $65 million plus $150 million in debt it used to buy control of Weber. 

Is Weber Worth More Than $6.25?

When the company priced its IPO before going public, the range was $15 to $17. The fact that it priced at $14 is a tell-tale sign that investors weren’t too keen on its business. 

Weber’s competitor, Traeger (COOK), went public a few days before. Its range was $16 to $18. It was priced at $18. It gained 22.2% on its first day of trading. It’s down 78.2% from its IPO price, 25 percentage points worse than Weber, so you never know how things will play out. 

We know that both companies are at or near penny-stock status. 

BMO Capital Markets analyst Simeon Siegal believes that BDT Capital Partners is doing the deal to take Weber private so that it can do what’s necessary to fix what ails the company behind closed doors and out of the spotlight of the public markets.

“‘In what appears a growing (and understandable) recent-IPO-take-private trend, BDT offered to acquire WEBR for $6.25, just above our prior $6 target price,’ he wrote in a note released on Tuesday. BMO Capital Markets raised its Weber price target to $6.25.” MarketWatch reported. 

Weber’s Q3 2022 reported a 21% decrease in revenue to $528 million, with a $25 million operating loss. For the first nine months of fiscal 2022, its revenues fell 13% to $1.42 billion, with an operating loss of $77 million. 

As of June 30, Weber had $1.2 billion in debt, up from $985 million in September 2021. The company was looking for debt financing from BDT Capital Partners earlier in October. It appears Byron Trott decided a take-private transaction made more sense.

Of the six analysts that cover WEBR stock, the average rating before the offer from Trott was Underweight with a $4.45 target price. 

At this point, something tells me that $6.25 is the best price Weber will get. 

Don’t feel bad for Trott. BDT Capital Partners will make money on its original investment by hook or crook. 

Weber just got grilled by the billionaire investor. 

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