Although eyebrows were raised by some analysts at the 375 pence per share cash offer price made by Mars to buy the company – a premium of 160% - the Hotel Chocolat brand fills in a gap for the US confectionery giant and gives it a foothold in the more expensive and resilient luxury chocolate market.
Undoubtedly, it was the right time for Hotel Chocolat to sell as the Aim-listed company’s shares were on the slide, down 80% before the takeover from Mars last week.
But is it a good deal for Mars?
As this publication reported, soaring commodity prices have left chocolate makers feeling the pinch as consumers tighten their belts, with companies such as Lindt & Sprüngli and B2B chocolate cocoa supplier Barry Callebaut seeing volumes fall or remain at best flat this year.
Bryce Elder, the FT’s Alphaville’s City editor, said Mars is paying “silly money” for Hotel Chocolat. In contrast, Duncan Macaskill, a director at food & drinks consultancy Levercliff, said: “Huge bid premium being paid by Mars, who should know their onions, for Hotel Chocolat suggests that there really could be a huge disconnect between the stock market valuation of some small & mid-cap companies and their true 'worth'.”
Mark Brumby, chief executive, Langton Capital, said: “The purchase of Hotel Chocolat by Mars is an interesting development. It looks to be a good fit as Mars can support its international expansion ambitions.
“However, Hotel Chocolat is notably different from their other chocolate brands, which predominantly have mainstream appeal, so there are likely to be challenges as the two firms come together, similar to when Cadbury's purchased Green & Blacks ….
“It will be important that they don’t lose the brand appeal as they grow and scale up the Hotel Chocolat brand. Retaining one of the founders, Angus Thirwell, as Chief Executive will be key to help smooth the transition and ensure that the brand values remain intact.”
Christopher Ruane writes on UK financial markets for the motelyfool website: “From Mars’ perspective, I think that makes perfect sense. Hotel Chocolat is a premium brand with a dedicated following. Mars has global manufacturing and distribution capabilities, which could allow it to scale Hotel Chocolat’s sales volumes and revenues.
"The Mars bar maker’s buying power, size, and experience could help the multinational firm boost profit margins as it grows Hotel Chocolat’s international footprint.”
