Comvita spurns hostile Cerebos bid

Cerebos New Zealand is offering $71.6 million to buy Comvita. Photo / Alan Gibson.

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 per cent 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 per cent 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 per cent 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 per cent to S$4.78 on the Singapore Exchange yesterday, and have dropped 2.4 per cent this year.

The company has a market capitalisation of US$1.19 billion.