Pet food and confectionery giant Mars has announced it will buy ailing UK chocolate business Hotel Chocolat, in a cash offer that values the company at about £534 million (€611 million) on a fully diluted basis.
Hotel Chocolat said US group Mars would help it grow overseas, following abortive attempts at expanding in markets including the US. The deal comes after the company suffered sinking demand for its products from cash-strapped consumers in its most recent financial year. It has two outlets in Dublin and two in Belfast.
Mars’s offer values the British cocoa manufacturer at a premium of 169.8 per cent to Hotel Chocolat’s share price of 139p at the close of business on November 15th, the companies said on Thursday.
The chocolatier, which was founded as an online retailer in 2004, swung to a loss in the year to July, falling from a pretax profit of £21.7 million to a loss of £800,000. It blamed inflationary pressures, weak consumer sentiment and the cost of restructuring efforts following a botched international expansion in the US and Japan.
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Hotel Chocolat said in a statement on Thursday it considered the terms of the deal “to be fair and reasonable”, adding that Mars’s global supply chain and commercial relationships would help the company get the expansion of its business abroad back on track.
“We know our brand resonates with consumers overseas, but operational supply chain challenges have held us back,” said Hotel Chocolat’s founder and chief executive Angus Thirlwell.
“By partnering with Mars, we can grow our international presence much more quickly using their skills, expertise and capabilities.”
Last year, Hotel Chocolat announced the closure of its US stores after heavy losses, and wrote off its investment in a Japanese join venture. The company has since agreed a new joint venture in Japan.
“Over the last year or two it has become clear to the Hotel Chocolat directors that achieving this potential will require substantial investment and time ...” the company said in a stock market update on Thursday.
For Mars the acquisition represents an opportunity to move into the higher value premium chocolate category. Nestlé made a similar move with its acquisition of Brazilian premium chocolate maker Grupo CRM earlier this year. – Copyright The Financial Times Limited 2023
