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Mars Inc., the US candy company, agreed to buy Britain’s Hotel Chocolat Group Plc for £534 million ($664 million) and pledged to help the high-end seller of chocolate “puddles, slabs and batons” expand internationally.
The Bounty maker offered 375 pence a share in a deal recommended by the board of the UK company. The cash offer represents a premium of 170% to Hotel Chocolat’s closing price on Wednesday.
Shares of Hotel Chocolat rose to near the offer price in trading on news of a potential takeover with the biggest premium seen on the London Stock Exchange in 25 years. The valuation is still below a 526 pence a share peak in October 2021.
Mars said it was prepared to shell out for Hotel Chocolat as the boutique brand’s high-end wares bring a different offering to a company which sells more mass-market products like Snickers, Twix and Maltesers.
Chocolate Foundations
Hotel Chocolat was co-founded by Angus Thirlwell and Peter Harris who joined forces to sell corporate-branded mints, before moving to selling gourmet chocolates and running cafes. It owns the Rabot estate and cocoa plantation on Saint Lucia.
“This is the fulfilment of Hotel Chocolat’s destiny as we see it which is to become a leading brand in major markets through reinventing chocolate,” Thirlwell said in a phone interview Thursday. He added that there had been an “extraordinary meeting of minds” with Mars which is one of the largest closely held companies in the US.
Thirlwell and Harris both stand to make around £140 million each from the deal, although Thirlwell plans to invest 80% of his shares and those held in his family trust back into the business. Harris is retiring and selling the majority of his stock but will reinvest in the business “to a smaller degree,” according to Thirlwell.
There is currently about 70% shareholder support for the takeover which legally requires a 75% approval threshold to pass. “Nothing is going to stand in the way of us doing this deal,” said Thirlwell.
The secret negotiations between Mars and Hotel Chocolat — whose code names “Beekeeper” and “Queen Bee” were accidentally revealed in an early press release — led to a “very respectable” valuation, Thirlwell added.
Mars has long had its eye on Hotel Chocolat because of its unique proposition, said Andrew Clarke, global president of Mars Snacking by phone. The US confectionery giant is committed to keeping the company “special” while helping it grow and open more UK stores, Clarke said.
Hotel Chocolat was forced to scale back its international expansion plans last year, cutting investments in the US and Japan amid inflation and the weakening global economy.
Tasting Clubs
Known for its chocolate with higher cocoa and lower sugar content as well as items like its “Velvetizer” device for making hot chocolate drinks, Hotel Chocolat has 131 stores in the UK and 21 in Japan with a licensing partner as well as an online business. The brand said it will continue to use less sugar, a selling point at a time when there’s growing pressure on consumer goods companies to produce healthier food.
Hotel Chocolat hasn’t been immune to inflationary pressures affecting consumer demand and sales fell 10% last year, as it swung to an underlying loss. The chocolate maker is also grappling with rising cocoa and sugar prices, which recently hit record highs.
Hotel Chocolat said the disappointing results reflected a year of “intensive re-shaping” to deal with its previous fast growth, adding that remaining independent would require raising capital to expand.
The offer from Mars is a sign that the cost-of-living crisis hasn’t stopped consumer goods companies focusing on selling more expensive brands.
Mars has bought smaller, entrepreneurial brands before, such as KIND, Nature’s Bakery and Tru Fru. The company has operated in the UK since 1932 and employs about 10,000 people there.