Premium confectioner Hotel Chocolat has agreed a £534m sale to US giant Mars after conceding it was unable to accelerate international growth even as a publicly listed company.
The retailer and chocolatier announced the 375p per share cash deal with Mars on Thursday. Representing a 170% premium on its share price of 139p at the close of business on Wednesday, and almost triple the average price of 127p for the previous 60-day period, Hotel Chocolat said its share price did not reflect the “value and potential” of the group.
Hotel Chocolat shares were trading above 500p at the start of 2022, but its share price crashed amid “disappointing financial results” that left the group facing a strategic reset in which it shuttered its US stores and scaled back investment in both the US and Japan.
Last month it posted losses of £800k in the year to 3 July from a £21.7m profit, while sales fell back 10% to £204.5m as performance was hit by its business restructure and pressures from inflation and consumer sentiment.
Hotel Chocolat said its aborted international push showed the “scale of the challenge” to grow the brand internationally and therefore the company needed “a level of investment that is likely to exceed that available from its own resources”.
It added that the sale agreement reflected its likely difficult “in the short to medium-term” to raise the significant equity funding required to expand the business internationally.
Angus Thirlwell, CEO of Hotel Chocolat, said the brand’s global ambitions were undimmed by its previous scaling back of international operations. He said it remains its “brand destiny” to become a “leading premium chocolate brand in major markets through reinventing chocolate for people and nature”.
He explained: “We know our brand resonates with consumers overseas, but operational supply chain challenges have held us back.
“By partnering with Mars, we can grow our international presence much more quickly using their skills, expertise and capabilities.”
Mars highlighted its international footprint, global supply chain and extensive commercial relationships as providing a platform to grow the Hotel Chocolat brand.
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.”
He also said the investment reflected Mars’ commitment to the UK market where it has operated since 1932 and employs approximately 10k people.
Analysts at Peel Hunt described it as “a knock out bid”, adding: “As a multiple current of forecasts or even of peak earnings, this looks like a decent bid.”
The deal is expected to close in the first quarter of 2024, subject to shareholder and regulator approvals.