Byron Trott's Firm Orders a Double, Adds Whiskey to Tequila Bet
January 17 2019 - 11:22AM
Dow Jones News
By Liz Hoffman
The investment firm run by Byron D. Trott is buying a minority
stake in WhistlePig, a distiller of high-end whiskeys, the latest
sign of the spirit's grip on American's tastes and wallets.
BDT Capital Partners is making a bet that consumers will
continue to pay up for craft cocktails. A bottle of WhistlePig's
special edition Boss Hog V -- named for Mauve, one of two pigs that
once lived on its Vermont farm -- sells for $550. Last year, BDT
bought a controlling interest in Casa Dragones tequila, whose
premium bottles can set shoppers back $280.
Overall alcohol consumption is falling, but when they do reach
for a drink, Americans are increasingly shelling out for premium
and small-batch spirits over everyday brands, much as craft beers
have eaten into national brands' market share.
"Tastes have changed, and these brands have legs if you do it
right," Mr. Trott said in an interview.
Diageo PLC bought George Clooney's Casamigos tequila brand for
up to $1 billion in 2017, and has since sold dozens of lower-shelf
brands, including cinnamon schnapps Goldshclager and Popov vodka,
in a pivot toward premium liquor. The company's finance chief
summed up the move: "People are not drinking more, they are
drinking better."
Mr. Trott spent 27 years at Goldman Sachs Group Inc. founding
his eponymous firm in 2009. At Goldman, he had earned the loyalty
of Warren Buffett, advising on Berkshire Hathaway's biggest deals
and helping to secure the billionaire's 2008 investment into
Goldman.
BDT, which now has 175 employees, follows the old
merchant-banking model marrying advice and investment, once
practiced by firms such as Shearson and First Boston but mostly
abandoned by today's megabanks. He courts family-owned and
privately held companies, advising them on deals and raising money
from their founders.
BDT is investing its second fund, a $6 billion pool raised in
2016, and raising a third that is expected to be larger. The firm
has stakes in 14 companies, including fashion brand Tory Burch LLC
and the coffee empire assembled through acquisitions by European
firm JAB.
WhistlePig was founded in 2008 by Wilco Faessen, then a Lehman
Brothers banker to beverage companies, and Raj Bhakta, who had
unsuccessfully run for Congress on the back of an appearance on the
reality TV show "The Apprentice." After organizing a bid for a
struggling Vermont vodka distillery, the pair found quality rye
whiskey from Canada and blended, bottled and started selling in
2010.
"We heard from the snobs," Mr. Faessen said in an interview,
"and ignored them." Today WhistlePig blends rye purchased elsewhere
and distills its own crop, earning what Mr. Bhakta said was a
grudging respect from "the good old boys in Kentucky."
BDT is buying out Mr. Bhakta, who left the firm in 2017 after a
dispute with his co-founders about whether to sell the firm in its
entirety. The company hired bankers to sound out investors the same
year, but the process ended without a signed deal. Mr. Trott --
who, like his most famous client, Mr. Buffett, doesn't participate
in auctions -- had watched from the sidelines and began speaking
with the parties last year. Both he and Mr. Bhakta declined to
discuss financial terms of the transaction.
WhistlePig CEO Jeff Kozak credited BDT's longer-term investing
horizon. "Whiskey is not a business you can run by the quarter," he
said.
Mr. Trott said he expects to add some WhistlePig to his Chicago
office, which already stocks Kind granola bars and Dove chocolates,
both BDT clients.
Write to Liz Hoffman at liz.hoffman@wsj.com
(END) Dow Jones Newswires
January 17, 2019 11:07 ET (16:07 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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