Predators continue to swoop on the UK stock market’s undervalued prey and a number of consumer-facing firms have drawn bids or flagged takeover interest since Shares addressed the mergers and acquisitions theme on 16 November.

High-profile targets include Hotel Chocolat (HOTC:AIM), City Pub Group (CPC:AIM) and Musicmagpie (MMAG:AIM), and given the lowly valuations currently ascribed to UK consumer stocks investors can confidently expect further bids heading into 2024.

MARS SCOOPS UP CHOCOLAT

The latest in a long line of British companies to attract bids from overseas buyers is premium chocolatier Hotel Chocolat, which on 16 November revealed it had recommended an all-cash offer from privately-owned Snickers-to-Skittles maker Mars. Amazingly, the 375p offer price represents a 170% premium to the target’s 139p closing price on 15 November - bid premiums are typically in the 25% to 50% range - though it is around 27% below the all-time highs the posh chocolate brand reached in December 2021.

Mars, whose opportunistic swoop comes at a time when Hotel Chocolat’s management is reshaping the business, sees a strong cultural fit between the two firms and believes it is well-positioned to support the upmarket chocolate brand’s next growth phase given its international footprint, global supply chain and extensive commercial relationships.

Family-controlled US food giant Mars’ willingness to pay such a fat premium shows it has taken a long-term view of what Hotel Chocolat is worth and doesn’t want to waste time with a low-ball offer.

In contrast, Young’s (YNGA:AIM) recommended bid for City Pub is pitched at a more modest 46% premium to the undisturbed share price and looks like a more standard takeover situation, as City Pub was always going to be a bid target from the day it was created.

BT EYES MUSICMAGPIE

Meanwhile, unexpected bidders have been circling car parts-to-bicycles seller Halfords (HFD) and refurbished electronics seller Musicmagpie. Media reports suggest van hire company Redde Northgate (REDD) held merger talks with Halfords, the motoring-to-cycling products seller which has been repositioning itself as a motoring services business, but discussions broke down over the thorny issue of valuation.

And shares in IPO flop Musicmagpie flapped higher on 20 November after the smartphones-to-computers recycler confirmed early-stage talks were afoot with telecommunications titan BT (BT.A) and private equity group Aurelius over a possible bid. What would BT want with Musicmagpie? Well, the Stockport-based firm has evolved from selling CDs and DVDs to selling, fixing and renting out mobile phones and other electronic devices. BT and its mobile brand EE deal in large volumes of phones, so bringing a refurbishment specialist like Musicmagpie under its wing could actually make sense.

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