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Mars’ £534mn Acquisition of Hotel Chocolat

By Argyro Charizona, Mikolaj Borowiak, Angelo Passaro, Rares Ionescu, Muhammad Adnan, Ruben van der Lubbe (Bocconi University) ; Matthew Liu, Junseok Choi, Divy Dayal, Amar Mian, Tim Chiu, Esah Hayat, Arth Kochhar, Vadim Rikunov, Max Sanders (Cambridge University)

Photo: Tetiana Bykovets (Unsplash)


Overview of the deal

Acquirer: Mars Inc

Target: Hotel Chocolat Group Plc

Total Transaction Size: £534 million

Closed date: Q1 2024

Target advisor: Lazard and Liberum (Financial)

Acquirer advisor: Morgan Stanley (Financial)

On November 16, 2023, Mars Inc announced it would acquire Hotel Chocolat Group plc for £534 million.The deal was unanimously recommended by the Hotel Chocolat board of directors. At 375 pence per share, it represents an approximately 170% premium to Hotel Chocolat's share price prior to the announcement. 

For Hotel Chocolat, it is an opportunity to accelerate their international growth ambitions with the capital, resources and expertise of Mars behind the brand. Going at it alone has proved to be difficult over the past two years, as botched expansion attempts in Japan and the US has driven down its share prices from a peak of 540 pence in late 2021 to 140 pence pre-acquisition. Due to changes in consumer preferences and government pressure, demand has shifted towards healthier and more sustainably-sourced chocolate. For Mars, this acquisition fills an important hole in their portfolio of chocolate. Competitors Hersheys and Nestle have also started buying up premium, healthier chocolate brands.

“We’re not in a position to speculate about the future potential [of market expansion] but what I can say is that the number one priority is the UK and making sure the UK is a real success … and of course there are international possibilities in the future.” - Andrew Clarke, Global President of Mars Snacking (Mars)

Company Details (Acquirer - Mars Inc.)

Mars Inc. is a leading manufacturer and distributor of chocolate, non-chocolate confectionery, food, and pet care products. Operating under three main segments: Petcare, Snacking, and Food and Nutrition, Mars markets products under well-known brands such as M&M's, Snickers, Dove, Mars, and Pedigree. The company's global operations span the Americas, Asia-Pacific, Europe, and the Middle East. Actively engaged in mergers and acquisitions, Mars has made 101 acquisitions since 1992. Led by CEO Poul Weihrauch and Chairman John Franklyn Mars, the company has previously financed its operations through a $4 billion credit facility and $10 billion in notes and bonds. In 2023, Mars launched its Net Zero Roadmap to achieve Net Zero greenhouse gas emissions by 2050.

Founded: 1911

Headquartered in: McLean, Virginia, United States

CEO: Poul Weihrauch, MBA

Number of employees: 140,000 (GlobalData), over 80,000 (Factset)

Market Cap: N/A (privately held)

FY22 Revenue: $48 Bn. (GlobalData), over 35,000 (Factset)

Company Details (Target - Hotel Chocolat)

Hotel Chocolat Group plc is a leading UK-based chocolate manufacturer and retailer. Its primary business is producing and distributing various chocolate goods, including boxed chocolates, luxury gifts, and custom-made chocolate slabs. The company’s UK market is divided into 3 segments: UK Physical, which includes stores and cafes; UK Digital, which includes online sales and subscriptions; and UK Partners, which focuses on B2B relations with third-party wholesalers and partners. Hotel Chocolat’s international presence spans several countries with substantial consumer markets, including the US, Japan, and Ireland. 

Founded: 1993

Headquartered in: Royston, England, United Kingdom

CEO: Angus Thirlwell

Number of employees: 2,340

Market Cap: £504.76 million (as of 11/30/2023)

EV: £570 million

LTM Revenue: £204.5 million

LTM EBITDA: £24.05 million

LTM EV/Revenue: 2.79x


Projections and Assumptions

Short-term consequences

After the acquisition, Mars plans to leverage the premium Hotel Chocolat’s “more cocoa less sugar” approach to facilitate its expansion into the healthy snacking alternatives. 

Recently, there has been rapid change in consumer tastes from sugar-laden treats to healthier options. However, the existing strategy of offering low sugar alternatives to the existing chocolates haven’t yielded much result for the American Confectionery giant. And the acquisition of Hotel Chocolat for 375 pence per share proves to be an efficient strategy for Mars.

In addition, The EU’s recent call for transparent supply chains and deforestation ban has propelled Hotel Chocolat’s acquisition. With focus on single origin procurement, premium brands ensure sustainability. Hotel Chocolat’s commitment to sustainable practices extends to investing in sustainability and paying a $250 premium per metric tonne above the market rate for ethical cocoa procurement.

The biggest advantage that Hotel Chocolat receives from this acquisition, other than the enormous paycheck, is the opportunity for them to revive their failed expansion into the international markets. Hotel Chocolat is well known for its high end products in the UK, however, its attempt at expanding into the North American and Japanese markets was lacklustre. The combined expertise of Mars Inc. in providing financial support, fostering commercial relationships and offering global supply chain expertise will prove beneficial for Hotel Chocolat to expand into the International Markets in the near future.

Mars has a track record of working with top brands such as KIND, Tru Fru, and Nature’s Bakery and this positions Mars to enable Hotel Chocolat’s management to continue delivering high quality, premium products to consumers.

Long-term Upsides

Hotel Chocolat’s £534M acquisition marks the last out of a long list of transactions that the American confectioner Mars, Inc. has engaged in over the last century. According to Andrew Clarke, Global President of Mars Snacking, the purpose-led and entrepreneurial environment that Mars has been fostering through the years will enable Hotel Chocolat to maximise its brand’s potential.

The statement underlines the importance Mars attributes to the long-term value this acquisition will bring, including a broader access to UK consumers, and an increased competitiveness in the premium chocolate market, which is expected to grow at a CAGR of 8.8% in the next 10 years. Despite Hotel Chocolat’s robust performance at early stages, disruptions in the global supply chain caused by the COVID-19 pandemic and a challenging macroeconomic landscape slowed down the ambitious aims of the company’s business plans.

While the British chocolate-maker was directing its efforts towards Japan and the United States, it soon realised that projects aimed at setting up manufacturing and distribution plants required an amount of capital and resources that the company’s owners were not able to provide. Mars’ management has proven to be enthusiastic at supporting Hotel Chocolat’s expansion both in the UK and international markets, possibly providing a stimulus to the geographical scope of the UK confectioner’s product offerings.

The strong cultural alignment of the two entities, driven by their shared passion for quality and sustainability, will represent a valuable asset for long-term integration prospects. Mars holds into great account the skills and experience of Hotel Chocolat’s management and employees and does not envisage unnecessary reductions to the company’s headcount, unless for listed company or back-office functions. 

Risks and Uncertainties

Valuation: Based on the deal’s terms, Mars will be paying Hotel Chocolat a value of 375p per share, representing a premium of 170% compared to the closing price of 139p. This is a high premium for the chocolate maker that has been recently underperforming, thus a significant turnaround is required on Mars’ end in order to make the deal accretive. 


Consumer Reaction: In face of the news, many consumers have been disappointed by the chocolatier with fears arising that the takeover will lead to a decline in quality. This was evident in the decline in quality when Thorntons was sold to Ferrero for £112 million. Although Mars has since said it has no plans to change recipes of Hotel Chocolat products, there is still hesitancy from the customer base. Hotel Chocolat, a brand that surfaces as premium chocolate, will experience declining revenue if this reputation is tainted by merging with a huge company like Mars.


Macro environment: Input prices for chocolate manufacturers are likely to remain elevated at record levels, acting to squeeze margins in the absence of retail price rises. In particular, cocoa prices have risen to their highest level in over a decade owing to extreme weather in the largest cocoa producing nations: Ivory Coast and Ghana. This said, Mars’ acquisition represents a pivot toward the luxury market, with sales for premium chocolate less affected by raw goods' prices.   


Regulatory challenges:  Mars’ plants subject to EU legislation face a supply-chain conundrum: in June of this year, the EU introduced a ban on the sale of goods whose production has involved mass deforestation. Cocoa imported from the likes of Ivory Coast and Ghana – where deforestation is widespread – and stored in the EU after December when the transition period ends may be found in violation of the law. 

“As an independent business, we would eventually get there. But this proposition allows us to connect with the Mars platform where there is an unparalleled wealth of knowledge, resources, and skills that is going to accelerate our ability to follow up on that potential.” - Angus Thirwell, Chief Executive (Hotel Chocolat)


FactSet Mars Company Profile, Debt and Capital Sources, M&A Activity Data

Mars Press Releases and Statements

Alternative Revenue and Employee numbers obtained from GlobalData


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