Proposed acquisition of Lindt by Nestlé

Abstract

The aim of this paper is to propose an acquisition of Chocoladefabriken Lindt & Sprüngli AG (Lindt) by Nestlé SA (Nestlé). Nestlé is a multinational conglomerate operating in the food and beverage industry. The brands of the firm are known worldwide. To enhance its confectionery business a deal with Lindt is proposed hereafter. An acquisition of Lindt makes strategically as well as operationally sense. Both firms operate in the chocolate business. Lindt is known to be a premium seller while Nestlé serves the mass market. Therefore, a combined firm could create substantial synergies and improve its market share. Lindt was valued to be worth 16.5bn (or 75.676 per share)1 with several valuation methods. As of the 12th May 2015 the firm traded at 58.80 which indicates a relatively high price. This paper suggests an acquisition price of 75.676 per share for 100% of the shares which represents a premium to the current market price of 28.7%. The acquisition should be financed with 39.2% of cash and 60.8% of debt. This is expected to lead to an increase of EPS and thereby increase the value of the shareholders.