By Sarah Young
LONDON (Reuters) -Britain's Hotel Chocolat agreed to a 534 million pound ($662 million) takeover offer from Mars Inc, as the specialist chocolatier succumbs to the U.S. food giant to help it grow internationally, netting its founders a tidy profit.
Shares in Hotel Chocolat soared in early deals after the two companies announced the deal on Thursday. They were trading at 364 pence, close to the 375 pence per share cash offer price that was recommended by the UK company's board and which was a 170% premium to Hotel Chocolat's closing price on Wednesday.
"We think that this is a knock-out bid," Peel Hunt (LON:PEEL) analysts said, adding they were not expecting any counterbid.
Hotel Chocolat's Chief Executive Angus Thirlwell and co-founder Peter Harris who both own 27% of the equity, according to LSEG data, have said they will accept the offer, meaning the deal will earn them about 144 million pounds each.
Set up 20 years ago, Hotel Chocolat's stated aim was to make chocolate exciting and it succeeded in bringing ethical affordable luxury to the British high street, with over 130 stores.
But it hasn't all been plain sailing. The 375 pence offer is where the shares were trading in April 2022 and is well below highs of 540 pence seen in late 2021, before botched expansion attempts cost it heavily, and a cost of living crisis hit UK sales.
Taking Hotel Chocolat's trillionaire shortbread and champagne chocolate truffles further afield has proved tricky so far, and Thirlwell said he had taken the company as far as he could as a small independent player.
He plans to stay leading the company for the next five years under the ownership of family-owned Mars, home of M&M's, Snickers and Skittles.
While the Hotel Chocolat brand was making progress in Japan and the United States, he said, despite previous setbacks, the company would soon need to set up manufacturing and build infrastructure in those markets, requiring capital and resources.
"Partnering with Mars opens up the possibilities that those things will be a lot easier and quicker," he said in an interview.
Asked how Hotel Chocolat, with its luxury hotel on its cacao estate in Saint Lucia, chocolate cookbooks and inventions which shun sugar in favour of cocoa, will fare under multinational Mars, Thirlwell said he was confident of the cultural fit, citing commitments to sustainability and quality.
"This is something that's all about growth. It's not about cost paring or anything like that," he said, adding that he expected all 3,000 Hotel Chocolat staff to be kept on.
The deal is expected to complete by the end of January.
($1 = 0.8072 pounds)