Glenboden M & A Originations

How will Lindt spend its $ 760 mln warchest ?

Priority Rating priority rating 2
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Origination Status company announcement of investment plans, March 2008
Asset candidates include Chocolaterie Guylian NV (Belgium), leading global Belgian chocolate brand
Buyer Lindt & Sprungli (Switzerland), leading global premium and luxury chocolate producer
Seller family owners of Guylian
Buyer Rationale Lindt hasn’t made an acquisition since 1998 and is awash with cash
Seller Rationale attractive valuation, inheritance fatigue
NBs so far Lindt has only said it will expand capacity in the US market, with the money
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Does Lindt really expect us to believe that it will invest its € 760 mln budget only on expanding production capacity, as a currency hedge, in the US ? Oh the price of steel these days ! We’ll make a bet that the real deal is going to be an acquisition or two; there are a number of high-end chocolate brands in the world that could be better commercialised under Lindt’s ownership.

Lindt’s financial performance in 2007 was stellar. Sales grew by 14% and operating profit by 18%. As a mature business, with turnover of € 3 bln, it will be hard to repeat those numbers in 2008 without a significant acquisition. Lindt’s last significant purchases were of Caffarel in Italy and Ghirardelli in the US, both made 10 years ago. These brands, like Lindt itself, are all about heritage, ethnicity and quality; we think Lindt’s next acquisition target will have a similar profile.

Lindt already has Swiss and Italian heritage in its portfolio; maybe it’s now the turn of that other iconic ethnicity in the quality chocolate universe, Belgian ? Guylian is reportedly the best selling Belgian chocolate brand in major export markets including the US; its sea shell forms are truly distinctive.

Lindt executives are maybe kicking themselves, now, that they didn’t acquire Godiva from Campbell Soup, which was sold instead to an unlikely buyer, from Turkey, last December for $850 mln. We believe there’s an opportunity to reposition and further commercialise that brand. Or maybe Lindt was only prepared to pay $750 mln for it ?

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