The strange case of companies sold for a pound (but there’s always a catch)
This month high end confectionary producer Hotel Chocolat have bought cosmetics firm Rabot 1745 for £4. That is less than the cheapest box of chocolates that Hotel Chocolat sell. There is a reason firms are sold for a song and Rabot 1745 is no exception – it was making a massive loss. Despite losing £400,000 last year Hotel Chocolat CEO Angus Thirlwell is convinced they can turn the firm around as both outfits feature products made from the Theobroma cacao tree. Hotel Chocolat uses cocoa from the seeds for chocolate and Rabot 1745 processes the cocoa beans to create cosmetics and health spa treatments so the purchase makes sense since Hotel Chocolat owns several cacao plantations in St Lucia.
When firms are on the point of collapse and riddled with debt they usually shut up shop, call in administrators to see if a buyer can be found as they continue trading and put themselves up for sale. The price tag varies but an eye-catching price like £1 or even the shockingly high price of £4 can clinch a deal.
In 2016 the DIY store Homebase was sold for £1 by Hilco although its debts were thought to be around £1bn so there was a catch. There was another one in 2015 when Sir Philip Green sold BHS for £1 to Retail Acquisitions who discovered its pension scheme was insolvent. And in 2013 when City Link was sold to Better Capital for £1 the buyers spent millions trying to turn the debt ridden firm around only for it to fail. For a £1 investment they ended up paying more than £40 million trying to make it profitable.
Others have included The Readers Digest that was sold for £1 in 2014 by Mike Luckwell despite being valued four years earlier for £13m. And Swansea City AFC was also sold for £1 in 2001 but eventually rose back up through the leagues to gain Premiership status for a time but currently reside in The Championship (the second level of the league) and posted a pre-tax profit of £2.7m last year. So it can work as proven at Chelsea where the club was bought for £1 in 1982 with debts of £1.5m. Russia’s Roman Abramovich bought the club 21 years later for £140m and it is now has a turnover of more than £400m.
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