PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 11:03 UK, 14th Jul 2014, by Agrimoney.com
Lindt expands in US, in 'most important' deal ever

Lindt & Sprungli unveiled its "biggest and most important strategic acquisition" ever, of US-based Russell Stover Candies, increasing its presence in a North American market where it is already growing at "double digit" rates.

The Swiss-based group said it would "greatly enhance" its status in North America's chocolate market, the world's biggest, by buying Missouri-based Russell Stover Candies, lifting to third its rank in the region's chocolate makers, behind Hershey and Mars.

"This biggest and most important strategic acquisition to date in Lindt & Sprüngli's history is a unique opportunity for us to expand our North American chocolate business," said Ernst Tanner, the group's chief executive.

The price of the takeover was not revealed, although there is talk that the price may have reached E1.4bn, which would represent nearly three-time Russell Stover's sales and, according to Kepler Cheuvreux, a lofty multiple of 23 times earnings before interest, tax, depreciation and amortisation (ebitda).

Taste for the US

The deal adds Russell Stover, whose pralines gained a high-profile appearance in the 1994 movie Forrest Gump, to a Lindt & Sprungli portfolio which already includes Ghirardelli – the group's last major acquisition, in 1998.

Indeed, there was some surprise among analysts that Lindt & Sprungli had opted for a developed market purchase, rather than expanding into Asia, seen by many investors as possessing greater growth potential.

Furthermore, Lindt & Sprungli has limited its scope for achieving cost saving through the deal by committing to keep the Russell Stover headquarters in Kansas City, besides to "improvements" at the business's chocolate plants in Colorado, Kansas and Texas.

'Double-digit growth'

However, Lindt & Sprungli highlighted advantages from the deal including strengthening in gift markets, where Russell Stover is particularly strong, and in boosting its relationship with retailers.

Lindt & Sprungli also noted "above average" expansion in trade in the US, where it achieved "double-digit organic growth in sales again" for the first half of the year.

Monday's deal will take the group's North American sales, which were SFr30m in 1992, above $1.5bn next year.

"The acquisition of Russell Stover clearly signals Lindt & Sprüngli's intention to improve its market position in North America, and further enhances the significant contribution which it already makes to the dynamic growth of the premium chocolate segment," the group said.

Lindt & Sprungli shares stood 1.5% higher at SFr55,550 in morning deals.

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