British Chocolate Maker Agrees to Foreign Takeover

on Oct 8, 2012

The AIM-listed confectionery and snack food group Zetar (LON:ZTR) agreed to a £43 million takeover by the privately owned German food group Zertus, The Times reported on October 6. Zetar, which listed in 2005, lost 70 percent of its value during hard economic times in 2008 and has been struggling to recover ever since.

Zetar specialises in producing snacks under third-party licences for media brands such as Disney and Hello Kitty, drink brands like Baileys and food brands such as Marmite and Branston. Zetar, whose products are sold primarily through UK retailers, has established operations in the UK and the Republic of Ireland, and recently signed its first licences for a new subsidiary in France.

Reuters reports that the UK confectionary maker listed in 2005 on London’s junior AIM market, and hit a high of 590p per share in 2007. In 2008, however, it lost 70 percent of its value. In 2012, Zetar reported adjusted pre-tax profit of £5.5 million on sales of £128 million.
!m[](/uploads/story/537/thumbs/pic1_inline.png)On October 5, the company announced that it accepted a 297p-a-share cash bid, a price around 26 percent above Zetar’s closing price on October 4. The Times quotes Zetar’s chairman David Williams who noted that the takeover offer had come “out of the blue”, commenting on the dismal valuations of small-cap London-listed companies. “You can pick out hundreds of small PLCs that are undervalued,” he pointed out. “I think we look cheap. People see us, they have money to spend and it’s attractive.” Zetar noted in its press release that it had considered the offer against the backdrop of the current uncertain economic outlook and consumer spending which remains under pressure.

The buyout is expected to benefit particularly Zetar’s managing director Clive Beecham, who stands to sell his 13 percent stake in the company for £4.9 million.
The bid was made by the German food company Zertus through its wholly-owned subsidiary Zertus UK. The German group, which was founded in 1826, makes soups, sweets, sauces and energy bars, and owns the Dextro Energy and Loser wafer brands. “The Directors of Zertus view Zetar as a particularly well managed confectionary and snacks business with leading market positions in the UK and Ireland,” said Joern Riemer, director of Zertus and Zertus UK, commenting on the takeover. “We are impressed by Zetar’s proven track record for innovation and brand building and are excited about the prospect of jointly expanding our enlarged portfolio of products to new markets.” Zertus has indicated that it would pay for the acquisition out if its cash resources.

The Times reports that Zetar was one of the largest independent UK chocolatiers after the takeover of
Cadbury by Kraft (NASDAQ:KRFT). Yet, Mr Williams commented that there was no reason for pessimism. “Nobody’s dying – this business is just going to be part of a bigger group with access to more cash,” he said, as quoted by The Times. “It’s not a question of them coming over, closing everything down and moving it to Germany.”


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