Lindt seen as possible target for Nestlé in 2010

Posted by Daniel Palmer on 16th November 2009

Lindt & Sprungli, the upmarket Swiss chocolate maker, is the sector’s “obvious” takeover target and could be snapped up next year, one analyst has claimed – with Nestle seen as the favourite to buy the business.

Jon Cox, an analyst at Kepler Capital Markets in Zurich, today (13 November) cut his estimate for Lindt’s share price in 2010, citing the pressure rising cocoa costs will put on margins.

In August, Lindt reported a slump in half-year profits and Cox argued that the company could issue a profit warning when it reports its annual results next March.

“We believe high cocoa prices will trigger another profit warning from Lindt, the second in as many years for the former food sector darling,” Cox said.

Lindt said in March that its profits would fall this year but claimed earnings would return to 2008 levels by 2010. Cox, however, warned that target is “increasingly unlikely” to be met.

He added: “We believe Lindt spends 12% of revenue – CHF300m – on cocoa and cocoa products. With cocoa rising by a third – albeit in pounds – it is not hard to envisage the company having to spend CHF400m on cocoa in 2010.”

Moreover, next year, Cox argued, could be a year in which Lindt finds itself the subject of a takeover bid. The Kepler analyst said the premium chocolate category remains an attractive business for the major global chocolate makers, which lack a truly international upmarket brand and business.

Cox told just-food that Nestle is the most likely candidate to buy Lindt and would prevail in the event of a takeover battle involving the likes of Mars Inc.

“I think Nestlé would win and it is obviously a Swiss-Swiss tie up. Nestlé is starting to invest again in chocolate again and can see its business is profitable after turning it around so I think in terms of strategic priority it is moving up the ranks for attention.”

just-food is the world’s leading portal for the global pre-packaged food and retail industries. Its daily mix of breaking news, views, analysis and research serves over 100,000 food executives each month.