In a not so surprising move, grill company Weber has agreed with BDT Capital Partners to be taken private once again. BDT Capital will purchase all of the outstanding Class A Shares that they don’t already own for $8.05 per share.
The per share price that BDT Capital is paying would value all of Weber at $3.7 billion, and is a 60% premium per share of the close price when the offer was made back at the end of October. The transaction is expected to close in the first half of 2023, with the date of June 11, 2023 listed on the Merger Agreement.
The move is one that was likely to happen for three reasons. The first is, as BDT Capital noted, Weber had too much leverage and needed more cash for the winter. The second is BDT Capital is their largest shareholder by far and said in their offer that they wouldn’t support an acquisition by anyone else of Weber. Finally, while Weber stresses the “independence” of the Special Committee of the Board that evaluated the offer, almost half of Weber’s board are affiliated with BDT Capital.
Weber’s Poor Financial Condition
With outdoor cooking being a seasonal business, and inventory at high levels, Weber was going to struggle to fund working capital through winter. It was rumored previously that they were going to take on and additional $60 million of debt from BDT Capital, making their leverage situation even worse.
According to an SEC filing that came out today with the acquisition announcement, they actually are also taking on potentially much more debt at a really high interest rate. Weber agreed to a loan up to $350 million at a whopping 15% fixed annual rate. Weber hasn’t disclosed publicly the previous $60 million, but we’re assuming that’s what’s referenced by the following statement in their press release of the acquisition.
The previous loan agreement that Weber entered into with BDT managed investment funds on November 8, 2022, will remain outstanding.Weber Inc.
The new loan is broken up into two parts, a delayed draw term loan for $120 million and a revolver of $230 million. It also came with an upfront fee of 2% of the loan amount, which is $7 million, and a commitment fee of 0.50% annually.
We’ll get more details on Weber’s financial condition when they report earnings later this week.
Is BDT Capital the Winner in This?
We don’t know all of the sales and purchases of Weber stock that BDT Capital has made since Weber IPO’d last summer, but is BDT Capital the winner in all of this? They were a major shareholder of Weber before the IPO and the IPO was priced at $14 in the height of the pandemic grill sales craziness. They are now buying Weber at $8.05.
While now they’ll be tasked with fixing Weber, it seems there was possibly some money made by pricing to public investors at $14 amongst unnatural expectations, then buying it back at $5.95 per share cheaper. Plus, they’re a big debt holder of Weber, so they’ll be paying themselves in the process.