Life on Mars as confectionary giant swallows Hotel Chocolat for £534m

AIM-quoted Cambridge Cluster company Hotel Chocolat has agreed a £534 million cash takeover by Mars Incorporated subsidiary Hive Bidco – clinching a £140m bonanza for founders Angus Thirlwell and Peter Harris.

The deal valued the chocolatier at 375p per share – a 169.8 per cent premium on its share price of 139p at the close of business on November 15, 24 hours pre-announcement. It is likely to complete in the first quarter of 2024.

The UK stock soared 227.50p (163.67 per cent) earlier this morning to 366.50p and at one point hit a new 52-week high of 367.50p. Contrast that to the 52-week low of 101.5p on August 30 at the height of the group’s struggles.

Mars believes it is well-positioned to support Hotel Chocolat's next growth phase with its international footprint, global supply chain and extensive commercial relationships, which could provide the brand with an enhanced platform for growth in the UK and potentially in new geographies.

Mars has a strong track record of nurturing entrepreneurial brands, including KIND, Nature's Bakery and Tru Fru, and believes the deal will further strengthen its commitment to the UK market where it has operated since 1932 and today employs around 10,000 people.

Over the last 20 years, Hotel Chocolat has evolved to become one of the UK's leading premium chocolate brands. Areas of international growth for Hotel Chocolat include the US digital subsidiary business, the cocoa agro-tourism Saint Lucian subsidiary business and Hotel Chocolat's minority shareholding in the Japanese brand licence partnership. 

Since Hotel Chocolat's initial listing on AIM in 2016, revenues have grown by 124.5 per cent. to approximately £205m in the 53-week period ended July 2, 2023. Disappointing financial results for period reflected a year of intensive re-shaping to deal with the consequences of Hotel Chocolat's previous fast growth.

Over the last year or two it has become clear to the Hotel Chocolat directors that achieving its full potential would require substantial investment and time. In particular, the need for, and cost of, the recent reorganisation of Hotel Chocolat's initial expansion into the US and Japan illustrates the scale of the challenge to grow the brand internationally.

With substantially all of Hotel Chocolat's free cash likely to be required for re-investment into its growth strategy for the foreseeable future, it is likely to be some time before the company is in a position to be able to pay a significant dividend, executives warned.

Angus Thirlwell, Chief Executive Officer of Hotel Chocolat said: “Hotel Chocolat's brand destiny is to become a leading premium chocolate brand in major markets through reinventing chocolate for people and nature. In Mars we have found a true meeting of minds – in strong cultural values, bold strategy and true long-termism.

“We know our brand resonates with consumers overseas, but operational supply chain challenges have held us back. By partnering with Mars, we can grow our international presence much more quickly using their skills, expertise and capabilities.

“I'm excited about the future of the business and in Mars we have found an excellent long-term steward of the Hotel Chocolat brand and everything we stand for.”

Andrew Clarke, Global President of Mars Snacking, added: “We have long admired the fantastic business that Angus, Peter Harris and the Hotel Chocolat team have created.

“Hotel Chocolat is a differentiated and much-loved brand, with an impressive product offering and a deep commitment to its values of originality, authenticity and ethical trading.

“The Mars and Hotel Chocolat businesses are highly complementary and during the course of our discussions with Hotel Chocolat's leadership it has also become clear that there is a very strong cultural fit – with purpose at the heart of both organisations and a shared passion for quality and sustainability.”