Thorntons bidding hots up

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Several more potential bidders have emerged for UK-based chocolate
manufacturer and retailer Thorntons, which earlier this month
confirmed that it had begun discussions with a financial investor.
But the company will hope for a swift conclusion in order to
concentrate its efforts on the key Christmas sales period.

Several more potential bidders have emerged for UK-based chocolate manufacturer and retailer Thorntons​, which earlier this month confirmed that it had begun discussions with one unnamed company.

Speaking at the company's AGM yesterday, chairman John Thornton said that talks were continuing with the private equity firm which made the initial approach, in association with several of the company's executive directors, with a view to taking the company private via a management buyout.

But he also confirmed that "a number of additional preliminary approaches have been received from interested parties independent of the management team"​, although he stressed that there was still no guarantee of any firm offer being made.

Press reports suggest that the initial offer was made by the Permira private equity group, and that it would have to offer around £120 million for Thorntons - a substantial premium to its current market value of around £107 million.

There is as yet no indication as to who the other bidders might be, but the likelihood is that they will be financial rather than trade investors, as Thorntons' combination of manufacturing and retailing its own products means that it falls somewhat between two stools. There are plenty of chocolate makers who would be happy to own the strong Thorntons brand, and a fair number of retailers who would benefit from its strong high street position, but few trade companies that would benefit from both together.

The potential sale of Thorntons has become a reality after a difficult period for the company, which seemed to have turned the corner after several turbulent years in the late 1990s when its product offering and retail format began to suffer at the hands of more sophisticated newcomers.

First half figures reported in February seemed to suggest that new chief executive Peter Burdon had helped turn the company around, with store revamps, an overhaul of the company's product range and the expansion of its products into the mainstream food sector in a bid to leverage the company's brand strength.

But pre-tax profit growth of 10.1 per cent in the first half was melted away by the hot summer weather in the second half, with full-year profits down 9.9 per cent at £6.4 million as consumers switched to products such as ice cream and soft drinks to combat the heat.

The first few weeks of the current year have not shown any noticeable improvement - despite Burdon's insistence in September that the decline was just a temporary setback - with like-for-like sales down 1.9 per cent in the first nine weeks of fiscal 2004.

But Thorntons' most important period is yet to come - Christmas - and the company will be looking not only for a good festive season but also for a swift conclusion to the takeover talks in order to ensure that it can concentrate fully on this key trading period.

Thornton told shareholders that it was hopeful of a good end-of-year performance, helped in part by new product listings in other retailers, but that it was impossible to predict a likely outcome for the first half until after the Christmas period.

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