Italian confectioner Ferrero has launched a takeover bid to buy UK chocolate group Thorntons, in a deal valuing the business at just under GBP112m.
The privately-owned group is offering GBP1.45 per share for Thorntons. Thorntons’ management, who were advised by Investec, have recommended the offer.
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Ferrero has already acquired a 29.9% stake in Thorntons after buying shares held by activist fund Crystal Amber and by the former chairman of the UK group, John von Spreckelsen, and his family. The 29.9% stake also includes shares bought from investment fund Hotchkis & Wiley.
The company said it has received “irrecovable undertakings” to accept the bid from shareholders that own a further 4.24% of the company.
The price represents a premium of 42.9% over the closing middle market price of GBP1.01 on Friday (19 June). The price is a premium of 66.6% over the average three-month closing price, Ferrero added.
“Ferrero is offering our shareholders an attractive premium to the average price of Thorntons’ shares over the last three months,” Thorntons chairman Paul Wilkinson commented as he detailed the board’s decision to back the offer.
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By GlobalData“Although the prospects for Thorntons as an independent company remain strong as the company embarks on the next phase of its strategy, the board of Thorntons also recognises the potential benefits to the brand and the business, including employees and all stakeholders from combining with the Ferrero Group.”
Thorntons shares nevertheless jumped in early trade this morning as investors were willing to bet that Ferrero will come back with a higher offer. Shares rose 42.37% to GBP1.44 at 08:50 am BST.
Commenting on the bid, Ferrero CEO Giovanni Ferrero said the company intends to grow its presence in the “important” UK market. “We delivered our best ever results in the UK in 2014, giving us confidence that now is the right time to broaden our roots in this important market,” he explained. “This transactions brings together two highly complementary businesses, but more importantly it unites two companies that share the same passion for growing brands, and a proud heritage, drive and culture built upon their family foundations.”
The bid comes a month after Thorntons announced CEO Jonathan Hart had decided to leave the business after four years at the helm.
Under Hart’s stewardship, Thorntons closed some stores in a bid to improve its profitability. Sales to other UK retailers is now the largest chunk of the company’s business.
Thorntons’ results for its most recent full financial year – for the period to 28 June – showed its top line and underlying pre-tax profits were higher than in the fiscal year before Hart took the reins.
Nevertheless, selling to the UK’s multiples is a challenge and, in recent months, there have been signs Thorntons has found the going tough. In its most recent financial update, Thorntons said the loss of a retail customer caused sales it makes through third-party customers including supermarket chains to slide as well. The group has focused on controlling costs to mitigate the sales pressure it is witnessing.
