If ever there was a sweet takeover deal, then surely today’s extraordinary offer by candy giant Mars to acquire Hotel Chocolat is it.
The global confectionery business has announced that it will buy upscale U.K. chocolatier Hotel Chocolat for $662 million as it seeks to fast-track the company’s stuttering overseas expansion.
The cash offer represents a $4.65 per share deal, a 170% premium on its pre-bid price of $1.72, which sent Hotel Chocolat’s stock price soaring to circa $4.50 per share.
As an alternative, investors can choose to secure a share in the bid company for each Hotel Chocolat share they already own, in an offer the board has recommended. Quelle surprise!
Hotel Chocolat, which was founded 20 years ago, has been a London-listed firm for the past seven years, said the deal would allow the brand to “grow further and faster”.
“We know our brand resonates with consumers overseas, but operational supply chain challenges have held us back,” said Hotel Chocolat chief executive Angus Thirlwell, no doubt struggling not to splutter over his hot chocolate as he announced what is surely the deal of the 2020s.
International Woes
Hotel Chocolat is predominantly based in the U.K., with 124 domestic stores plus outlets in Ireland and Gibraltar. However, to date overseas expansion has been anything but smooth and chocolatey. In September past it shut up shop in the U.S. as it closed its five stores at a cost of $4.3 million, although it continues to sell online.
Earlier this year, it also announced a Japanese joint venture with Tokyo’s Eat Creator Corp. to open 21 Hotel Chocolat stores after wrapping up its first attempt with former QVC
QVCA
The company now holds a 20% stake in the joint venture with Eat Creator and will receive royalties from the deal.
Hotel Chocolat also owns a Caribbean estate in Saint Lucia, which includes a 140-acre organic cacao farm plus the Rabot Hotel, but in its October results it disclosed a $4.3 million impairment charge because of “continued Covid-19 disruption where visitor numbers to the island have not recovered to pre-pandemic levels”.
In its full year results for the 53 weeks ended July 2, 2023, Hotel Chocolat described the year as “critical” for the business as it rebalanced ecommerce sales, reset its international business and saw the “initial benefits of the significant work to reshape our cost base”.
Lower sales driven by online and international sales reductions led to an anticipated small underlying loss, with a revenue decline of 10% to $253.5 million, with domestic sales down 8%, largely driven by a 24% fall in online and wholesale, while its stores showed an 8% increase in sales.
That meant an underlying loss before tax and exceptional costs of just under $1 million, compared with a profit of $26.9 million for the 2022 financial year.
Mars Lauds Hotel Chocolat
Outlining its reasons for the extraordinary premium on the bid, Mars said that it had long admired Hotel Chocolat’s “impressive credentials as a contemporary, premium brand with a differentiated product offering, world-class product quality and strong direct-to-consumer capabilities.”
Describing the companies as “culturally aligned”, Mars said that it believes it can support Hotel Chocolat’s next growth phase with its international footprint, global supply chain and commercial relationships.
Hotel Chocolat chief executive and joint founder Angus Thirwell will stay with the business under the terms of the deal.
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