Hotel Chocolat Group PLC (AIM:HOTC) could “flourish” with the support of a bigger parent company such as Mars, according to analysts.
The chocolatier has had a troubled couple of years, recording a 10% slump in sales in the year to July and implementing a cost-base reduction.
All that could be assuaged by today's “knock-out bid” from popular US chocolate maker Mars to buy the British luxury chocolate brand for £534 million through a Bidco, which Hotel Chocolat is poised to accept.
“Mars has made an eye-catching bid for Hotel Chocolat,” analysts at brokerage Peel Hunt said in a research note this morning.
“The consideration is 375p per share, and to us looks like a knock-out bid.”
According to analysts, the cocoa producer and chocolate seller was already on the road to recovery.
During a trading update in October, Hotel Chocolat said it had sold close to a million Velvetiser hot chocolate machines and would relaunch in the American market with the sale of drinkable chocolate products.
Peel Hunt analysts said they plan to reassess their target price for the asset, which is currently 125p a share, less than half of the price its shares are trading at today.
The chocolate company’s share price increased by 160% in early trades this morning to more than 360 pence each on the news that it could be acquired by Mars.
Analysts said that "multiple is certainly full": “Based on peak earnings, the multiple is in the early 20s: using our year-three forecast it is in the mid 30s.
“Some other assets in the retail sector may be buoyed by the size of the premium, and this further shows the extent to which some good assets are being undervalued," they added.