Britain Hotel Chocolat agreed to a 534 million pound ($662 million) takeover offer from Mars Inc. on Thursday, the specialist chocolatier succumbing to the U.S. food giant with international expansion in mind. Set up twenty years ago, the group aimed to make chocolate exciting by bringing ethical, affordable luxury to the British high street, and joint founder Angus Thirlwell remains chief executive to this day. The 375 pence per share recommended cash offer represents a 170% premium to the stock’s close on the day before the offer was announced and looks to end Hotel Chocolat’s seven years as a listed company.
Unlike mass-market competitors such as Thorntons, Hotel Chocolat sells most of its products directly to consumers through its chain of shops. This has allowed the company to keep a higher profit margin and retain consumer loyalty despite its range being more expensive than the average supermarket chocolate bar. The brand also avoids relying on price promotion, instead focusing on creating an ambient experience in its stores, which act as ‘billboards’ to attract passing shoppers.
The founders took a measured approach to growth as they built their business over two decades, plowing profits back into the firm and keeping it as light-indebted as possible. This approach has paid off, with Hotel Chocolat becoming a key player in the luxury confectionery market. The firm has a solid direct-to-consumer focus and an extensive retail presence, including over 130 stores in England, Scotland, and Wales. The business was one of the first to embrace e-commerce and is an early adopter of technology.
However, it is not immune to the challenges of a downturn in consumer confidence. In the half-year to December, sales and profit before tax fell below forecasts due to cost-of-living pressures and rising inflation. The Hertfordshire-based company warned it may not hit current earnings forecasts for the full financial year.
Investors were disappointed with the latest results and outlook, sending shares down more than 11% in pre-market trade on Friday. It added that raising the equity required to expand internationally while expanding its domestic store and retail distribution network would take more work. Mars, best known for its M&Ms and Snickers candy, praised Hotel Chocolat’s “impressive credentials as a contemporary, premium brand with a differentiated product offering and strong direct-to-consumer capabilities.” The deal is expected to be completed in the first quarter of 2024, subject to approval from shareholders. Global law firm Freshfields Bruckhaus Deringer advised the company on the deal. The team was led by corporate partners Piers Prichard Jones and Victoria Sigeti, alongside associates Angus Scott and Nikki Willson. The deal is part of a larger strategy by Mars to invest in its premium brands and create a more substantial direct-to-consumer business. It will complement its well-established global consumer goods and pet food business portfolio. This will include its recently announced acquisition of pet food and snack maker Purina.
