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Could Thorntons disappear from the high street?

Britain's biggest chain of chocolate shops is being munched up by Italian giant Ferrero.

by Jack Torrance
Last Updated: 02 Sep 2015

Another Thorntons chocolate, Mr Ambassador? Ferrero, the Italian confectionery giant known in Britain for its horrendously cheesey Ferrero Rocher ads, has agreed a deal to buy Thorntons, one of Britain's biggest chocolate brands.

Ferrero is offering 145p per share, valuing the business at around £111.9m, which sent Thorntons shares rocketing more than 40% to 144.06p this morning. The bid has echoes of Kraft’s controversial takeover of Cadbury, although the smaller size of Thornton’s means it’s unlikely to attract the same scrutiny.

£112m might seem like a low price for a business that raked in around twice that in revenues last year, but it reflects the company’s faltering performance. In the 28 weeks to 10 January it posted a dip in sales of more than 8% to £128.2m, and it’s currently looking for a new chief executive after Jonathan Hart said he would step down last month. Thorntons' brand has struggled to remain desirable amid competition from both more upmarket chocolatiers and discount retailers.

Which all begs the question, what does Ferrero want with it? The company, whose CEO of four decades, Michele Ferrero, passed away back in February, is a food manufacturer, not a retailer. So is Thorntons destined to become just one of the giant’s portfolio brands, alongside the likes of Nutella, Tic Tacs and Kinder Surprise?

The deal announcement says Ferrero pledges to protect the Thornton’s brand and its Derbyshire factory, but makes no mention of its high street presence, so we can assume it could be for the chop. 

‘Ferrero cannot be certain what, if any, repercussions there will be for the locations of Thorntons' places of business, or the redeployment of Thorntons' fixed assets or employees and currently has no firm intentions in relation to the foregoing,’ the statement said.

But don’t lament its demise just yet. The announcement notes, ‘The UK has been a successful market for Ferrero and the management aims to expand Ferrero's presence in this strategically important market.’  Perhaps Ferrero sees this as an opportunity to get into retail, and we can expect to see Thorntons stores packed to the gills with hazelnut spreads and Kinder eggs in the coming years?

It’s not impossible. Ferrero is unlikely to be buying Thorntons just for its FMCG unit, which has been under the cosh from discount-hungry supermarkets lately and whose sales were down 11.2% in the six months to January after a big client pulled out.   

Last month MT wrote that Thornton’s needs to get its Willy Wonka factor back. Perhaps Ferrero, whose late owner regularly drew comparisons with the Roald Dahl character, could be best placed to do just that.

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