Glenboden M & A Originations

M&A options for Lindt & Sprungli

Priority Rating priority rating 2
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Origination Status proprietory origination, September 2013
Asset Royce Confect Co. Ltd. (Japan), leading Asian luxury chocolate producer
Buyer Lindt & Sprungli Group (Switzerland), world's leading luxury chocolate producer
Seller founders of Royce
Buyer Rationale accelerated sales growth in Asia
Seller Rationale attractive valuation
NBs Asia only accounts for about 5% of Lindt's global sales
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The Swiss luxury chocolate producer Lindt & Sprungli has been back in the news, after booking 8,7% sales value growth in H1 2013. Where does the group sit in the global M&A landscape, and where might it look for its next milestone acquisition ?

Little chance of Lindt being acquired ...It's perhaps surprising that historically -steeped Lindt is mostly a free-float company. As at end 2012, only one shareholder of the Zurich -listed group held more that 5% of its voting rights - Lindt's own pension fund, with 21%.

At the same time, Lindt's EBITDA margin has consistently been above 15% (see profile). In the last 20 years shareholders have enjoyed rising dividends (pay-out ratio of over 40% p.a. since 2008), and a share price that's grown twelve-fold.

In that context, and with Lindt being the World leader in luxury chocolate, it's very unlikely that Lindt could be a viable acquisition target for any strategic investor, or even private equity mega-fund.

... no acquisitions since 1998 and flat growth ...At the other end, Lindt surely needs to make a significant acquisition. In spite of carrying a major warchest for several years (see profile), it failed to acquire the last major luxury chocolate brand that came onto the market - Godiva in 2008.

In fact, the group hasn't made any milestone acquisitions for 15 years. Since acquiring a string of European and US brands in 1994 -8 (Hofbauer, Bulgheroni, Caffarel, Ghirardelli), Lindt has focused only on organic development.

But to no avail - the group's mid-term top-line has been flat (see profile), and it's clear that its sales weighting in developing markets is far too small - 85% of sales were in western Europe and north America in 2012.

... developing markets the focus at lastSince 2010, Lindt is finally focusing on developing markets, especially in Asia, with wholly-owned subsidiaries established first in Tokyo, then in Cape Town, Shanghai and Moscow.

Maybe the group could accelerate its sales in Asia, by making a strategic acquisition there ? After all, Lindt's European purchases in the 1990s show the group's prepared to invest in local brands, not just in 'Lindt' and 'Lindor'.

One option is Japan's Royce (see graphic), privately held since its founding in 1983. That group is not only a recognised luxury brand in its domestic market; it has also in recent years established a string of own shops in Mumbai, Shanghai, Seoul and other major Asian cities.

NB. The multiples that we have used were taken from the Godiva luxury chocolate transaction in 2008 (see valuation). However there is no financial data on Royce in the public domain.

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THIS LEAD'S VALUATION
Size (€ mln) n/a
Sector chocolate confectionary
Asset Quality Japan luxury branded
Seller private founders
Buyer large plc
P/S 1,8
P/Ebitda 15,0
Type value estimate
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