Louisiana chocolate lovers should be interested to know that Switzerland-based Lindt & Spruengli AG has formally agreed to acquire Russell Stover Candies Inc., the largest producer of boxed chocolates in the United States. The Russell Stover brand rose to prominence in the U.S. candy market when it appeared in the 1994 Academy Award-winning film “Forrest Gump.”
If the acquisition is officially finalized, Lindt will remain the world’s largest producer of premium chocolate but will grow to officially be the third-biggest chocolate producer in North America. Lindt has not released any information about the acquisition price, but according to a Financial Times reporting in early July a purchase price of $1.4 billion has been under discussion. The company did confirm however that the acquisition, should it go through, will be the largest in the company’s history.
Lindt did release some details about the structure of the acquisition, disclosing that it plans to fund it using a mixture of net cash resources coupled with monetary bank loans. It claims that the acquisition will result in a positive contribution to the company’s overall earnings per share by as early as 2015.
Lindt’s main interest in acquiring Russell Stover is driven primarily by the fact that it is the largest U.S. maker of boxed chocolate. Couple that with the fact that the company reaps healthy annual sales of about $500 million and is projected to boost overall revenue in North America beyond $1.5 billion in 2015 gives Lindt a ready-made U.S. market for non-premium chocolate lines.
The acquisition of the privately owned Russell Stover will instantly grant Lindt 7.9 percent of the North American chocolate market, easily propelling it past Nestle SA, one of its strongest competitors. The acquisition will do little to close the gap it has with Hershey Co. and Mars Inc. however since they both garner over half of the U.S. market. It will also give Lindt both the Whitman’s, as well as Pangburn’s Candies brands which Russell Stover also owns and operates.
Such acquisitions are an exciting prospect for businesses. Many aspects of the deal must be looked at to ensure that it is profitable and agreeable to government regulators. Sometimes such deals can get complex and it may help to have a business law firm by one’s side during negotiations.
Source: Bloomberg, “Lindt Buys Russell Stover in Company’s Biggest Purchase,” Corinne Gretler, July 14, 2014