On the 16th of November 2023, US-based food and confectionery producer Mars announced their acquisition of specialist British chocolate manufacturer Hotel Chocolat. The deal is being advised by Lazard and Liberum Capital for Hotel Chocolat, and Morgan Stanley for Mars. The cash offer for £534 million was accepted by Hotel Chocolat, with a sizeable payday of approximately £144 million for each of its two co-founders. Notably, the Hotel Chocolat share price soared, trading at 364 pence which was at a 169.8% premium to the closing on Wednesday.
Hotel Chocolat was founded in 2004, with their stated aim being to bring ethical affordable luxury to the British high street, evidenced by their establishment of 130 stores. The firm has experienced relatively strong business growth over the last 19 years, yet as of late Hotel Chocolat has struggled. The firm made a loss this year of £800,000 and there was a year-on-year sales decline of 10%. In fact, Hotel Chocolat had to shut down its 5 shops in the US last year. Since being listed on the London stock market in 2016, the stock has lost about a third of its value. Inflationary pressures, weak consumer sentiment, and high restructuring costs were the main reasons behind their poor performance. Hotel Chocolat’s co-owner, Angus Thirlwell, expressed that he had taken the firm as far as he could as a small independent player.
US food giant Mars is a multinational parent company of many strongly performing firms in sub-verticals like pet care, confectionery, and food & nutrition. Particularly, within snacking, the acquisition of Hotel Chocolat adds to a highly impressive portfolio of firms like M&Ms, Skittles, Snickers, Galaxy, Hubba Bubba, and more. The rationale for Mars in the acquisition of Hotel Chocolat lies in the opportunity to move into the higher-value premium chocolate category. One of their largest competitors, Nestlé, has also made a similar move with their acquisition of Brazilian premium chocolate manufacturer Grupo CRM this year. Going into the future, as a means to facilitate geographic expansion, especially into Japan and the United States, the deal allows Hotel Chocolat to leverage the existing infrastructure of Mars and save on otherwise significant startup capital expenditure.
The sentiment regarding the deal is fairly positive, with analysts at Peel Hunt calling it a “knockout bid”. Both old co-owners have decided to reinvest into the business, with Angus Thirlwell staying on as chief executive and choosing to reinvest 80% of his earnings in “the future of the business alongside Mars”.
Written by: Siddh Patel
Sources: Financial Times, Reuters, BBC, Mergerlinks
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