Comvita spurns hostile Cerebos bid

Friday 14th October 2011 1 Comment

Manuka honey-based wound care maker Comvita is urging shareholders not to accept a $71.6 million offer to buy the company from Cerebos New Zealand, the local bid vehicle of Singapore-listed Cerebos Pacific.

Chairman Neil Craig told investors the offer is “unsolicited, unwelcome, opportunistic and your directors have reason to believe this offer undervalues Comvita by a considerable margin.”

In a letter to shareholders, he advises holding onto their stock pending further advice from directors, and said the company is on the verge of reaping the rewards of long-term planning.

“The directors consider that Comvita’s current share price on the NZX does not fully reflect the value of the company and the potential to increasingly reward shareholders from this year onwards,” Craig said.

“This offer by Cerebos is an opportunistic attempt to capture the benefit of the company’s innovation and hard work that our loyal and patient shareholders deserve.”

The rebuff comes after the Cerebos vehicle made an offer of $2.50 a share for Comvita, a premium of 19 percent to yesterday’s closing price, in a bid to take control of the local manuka honey-based wound care manufacturer and delist it.

Cerebos plans to operate the company on a standalone basis, and says it will look to use its links into Asia to market the brand into one of the fastest growing regions in the world.

“Cerebos would be looking to explore areas of collaboration,” sister company Cerebos Gregg’s chairman Trevor Kerr said in a statement. “In particular, we can provide strategic assistance in sales and marketing in Asia where the Comvita brands are not yet well established.”

Comvita’s shares were unchanged at $2.10, and have surged 42 percent this year, valuing the company at $62 million by market capitalisation.

The stock is rated a ‘buy’ by the one analyst who follows the company, according to Reuters.

The offer comes a month after Comvita settled a patent dispute with Brightwake, where it granted a sub-licence to the British rival letting it manufacture, distribute and sell its Algivon brand in territories where the Comvita subsidiary Apimed Medial Honey has patent protections.

As part of the settlement, Comvita avoided a 226,000 pound payment.

The Te Puke-based company expects annual profit of between $7.3 million and $8.2 million, with sales likely to be between $91 million and $95 million.

Cerebos Gregg’s, whose local brands include Caffe L’Affare coffee, Bisto gravies, and Raro drink powder, recently invested $13 million to expand facilities in a joint venture at Mount Maunganui, and is spending $6 million on the country’s only instant coffee producing plant in Dunedin.

“We believe the business has potential which can only be fulfilled by an increased investment in research and development and brand building – even at the expense of short to mid-term profitability,” Kerr said.

The offer is conditional on Cerebos reaching 90 percent acceptances to force the compulsory acquisition of the remaining shares, and let it delist the company.

If it falls short and decides to declare the takeover unconditional, it will “seek appropriate representation on the Comvita board and will participate in decisions relating to Comvita and its future through the Comvita board,” according to the offer document.

Shares in the parent Cerebos Pacific fell 0.6 percent to S$4.78 on the Singapore Exchange yesterday, and have dropped 2.4 percent this year. The company has a market capitalisation of US$1.19 billion.

(BusinessDesk)

BusinessDesk.co.nz

Comments from our readers

On 14 October 2011 at 12:45 pm Siena said:

Kiaora. I do hope that Comvita shareholders heed the advice of Chairman Neil Craig. Manuka Honey has that UMF (Unique Manuka Factor). Manuka honey has long had a reputation as a "healing" honey and, because it comes from bees that have been busy pollinating the Manuka trees that grow almost exclusively in the East Cape region of New Zealand, it has rarity value. This makes it expensive. Honey has long been seen as one of health's "superfoods" (I use the inverted commas as no food is "super" in isolation), offering a number of benefits. Local honey containing local pollen can help reduce the symptoms of hay fever. Most honeys contain a naturally occurring active agent, which is thought to support good health but is easily destroyed when exposed to heat and light. Manuka honey contains an extra, naturally occurring active ingredient, which makes it distinct from other honeys. This additional component is stable and doesn't lose its potency when exposed to heat, light or dilution. Its special quality is known as UMF and the higher the UMF, the more potent the honey and its powers (aficionados reckon that you need a UMF of 10 or higher for the honey to be properly effective). It has antiviral and antibacterial actions, which is a good excuse for scoffing the stuff neat at the first sign of a cold or sore throat. Most people who buy Manuka honey simply put it on their toast or in their tea, but where it really comes into its own is in treating wounds. In New Zealand, it has long been used in this way and studied extensively and I believe the National Health Service in the UK is doing the same. According to doctors, Manuka honey's high sugar content creates a waterless environment in which the bacteria that are infecting a wound are unable to survive. Also, thanks to the presence of an enzyme called glucose oxidase, it is acidic, which apparently adds to its unique antibacterial properties. Manuka Gold Active UMF 10+ honey...Choice! As long as the company continues to invest in infrastructure, it will "retain it's position as a global leader in the field." As part Comvita's "growth strategy, it has recently upgraded its production facility at the Paengaroa site to cope with increasing demand. It extended the honey packing room by a third." "Its secret recipe for medi-honey has helped grow revenue, aided by the fact the medi-honey dressings are now registered with the US Food and Drug Administration which Bougen said is the first natural medical product with FDA approval for general sale...This is the key to it's success. Kia kaha Comvita (stand your ground and stay strong!).