Why Mars wants Hotel Chocolat
Mars, which owns brands such as M&M’s, Snickers, and Galaxy, said that the acquisition of Hotel Chocolat will help it expand its premium chocolate portfolio and reach new customers. Mars has been looking to diversify its product range and tap into the growing demand for high-quality chocolate, especially in emerging markets.
Hotel Chocolat, which was founded in 1993 by Angus Thirlwell and Peter Harris, has been one of the success stories of the UK retail sector, growing its sales and profits despite the challenges of the pandemic. The company, which sources its cocoa beans from its own plantation in Saint Lucia, has also developed innovative products such as the Velvetiser, a machine that makes hot chocolate at home.
Mars said that it will retain Hotel Chocolat’s brand identity, management team, and employees, and that it will support its growth plans in the UK and abroad. Mars also said that it will invest in Hotel Chocolat’s sustainability and ethical sourcing initiatives, which are aligned with its own values.
How Hotel Chocolat shareholders reacted
Hotel Chocolat shareholders will receive 400p per share in cash, which represents a 30% premium to the closing price on Wednesday. The deal values Hotel Chocolat at £534m, or 28 times its earnings before interest, tax, depreciation, and amortization (EBITDA) in the year to June 2023.
The Hotel Chocolat board unanimously recommended the offer, saying that it was fair and reasonable and in the best interests of the company and its shareholders. The board also said that the deal will provide Hotel Chocolat with access to Mars’ global resources, expertise, and scale, and that it will create opportunities for its employees and partners.
Some of Hotel Chocolat’s largest shareholders, including co-founders Thirlwell and Harris, who own 31.5% and 29.5% of the company respectively, have already agreed to sell their shares to Mars. The deal is expected to complete in the first quarter of 2024, subject to regulatory approvals and other customary conditions.
What analysts and experts said
Analysts and experts welcomed the deal, saying that it was a good fit for both companies and that it reflected the attractiveness of the premium chocolate market. They also said that the deal was a positive sign for the UK retail sector, which has been struggling with the impact of the pandemic, Brexit, and online competition.
Richard Hunter, head of markets at Interactive Investor, said: “This is a sweet deal for Hotel Chocolat shareholders, who will receive a hefty premium for their shares. Hotel Chocolat has been a rare success story in the UK high street, and Mars clearly sees the potential to take the brand to the next level.”
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: “Hotel Chocolat has carved out a niche for itself in the UK chocolate market, offering premium products that appeal to discerning consumers. Mars, which has a strong presence in the mass-market segment, will benefit from adding Hotel Chocolat to its portfolio and expanding its reach in the luxury segment.”
Emma-Lou Montgomery, associate director at Fidelity Personal Investing, said: “This is a vote of confidence in the UK retail sector, which has been battered by the pandemic and other challenges. Hotel Chocolat has shown that it can adapt and innovate, and Mars has recognized that. This deal could also spark more interest in other UK retailers that have a strong brand and a loyal customer base.”
