CONFECTIONERY giant Mars has agreed to take over Hotel Chocolat in a deal which values the luxury goods player at more than £530 million.
The 375p per share cash offer for the London-listed company, which values Hotel Chocolat at £534m, represents a premium of nearly 170% on its closing share price of 139p last night, underlining the determination of Mars to secure the deal and ward off other potential suitors.
The offer came as the chain had been operating at a loss after major restructuring efforts last year which helped to bring down costs.
It agreed to a new tie-up in Japan in January after the costly collapse of a previous joint venture in the country.
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The previous partnership led the group to write off around £22 million and it was forced to restructure the deal.
The group's share price has also suffered, trading almost a quarter lower for the past six months after two profit warnings earlier this year.
However, last month it said sales grew by more than a 10th in the three months to October and stores opened this year have been performing better than expected.
Mars, which also owns the Celebrations, Dove, M&Ms, and Snickers food brands, declared that it is “well-positioned” to support the growth of Hotel Chocolat in the UK, where it has more than 130 stores, and moves into new international markets. And it said the deal would further strengthen its commitment to the UK, where it employs around 10,000 people, by “bringing a much-loved brand into its portfolio and deepening its relationships with consumers.
Mars said in the bid document: “The UK has been an important market for Mars, and it expects this to be complemented by the acquisition of Hotel Chocolat, with its distinctive capabilities in product development, luxury gifting and immersive brand experiences.”
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Stephen Alexander, chair of Hotel Chocolat, said: “Hotel Chocolat is a brand with strong long-term prospects and today’s deal will allow it to grow further and faster. Joining forces with Mars will deliver great value through the cash offer for Hotel Chocolat shareholders and the combination will create exciting opportunities for Hotel Chocolat employees as part of Mars.”
Andrew Clarke, global president of Mars Snacking, said: “Hotel Chocolat is a differentiated and much-loved brand, with an impressive product offering and a deep commitment to its values of originality, authenticity, and ethical trading.
“The Mars and Hotel Chocolat businesses are highly complementary, and during the course of our discussions with Hotel Chocolat’s leadership it has also become clear that there is a very strong cultural fit - with purpose at the heart of both organisations, and a shared passion for quality and sustainability.”
Russ Mould, investment director at stockbroker AJ Bell, said while the deal was the latest in a long line of bids for British companies by overseas players, “this wasn’t a case of a London stock trading on a depressed valuation and someone swooping in to buy it on the cheap”.
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Mr Mould said: “Hotel Chocolat’s shares actually looked quite expensive based on near-term earnings because the company has been through a tough patch and has been trying to get back into profit.
“The fact Mars is willing to pay a 170% premium for the shares is remarkable on two accounts. First, bid premiums are typically in the 25% to 50% range so Mars paying so much more would suggest it has taken a long-term view of what the business is worth. Second, it suggests that Mars has spotted an opportunity and there is no way it wants to waste time with a low-ball bid.
“This looks like going in with its best offer with the hope of wrapping up the transaction as quickly as possible.”
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