$72m not enough for Comvita: Boss

Comvita New Zealand directors are urging shareholders to reject the $72 million takeover offer from Cerebos Pacific after an independent report showed the bid undervalues the local natural health products manufacturer and distributor by as much as 28 per cent.

Independent adviser Grant Samuel valued Paengaroa-based Comvita at between $3.40 and $4 a share, a premium of between 26 per cent and 38 per cent to Cerebos' $2.50 a share offer.

Grant Samuel said there was no compelling reason for investors to accept the bid, though it did not comment on Comvita's performance past 2012.

Comvita chairman Neil Craig said in his letter to shareholders that this was not the time to sell their shares.

"If a buyer emerges willing to fully recognise the potential of Comvita, we will assess such an offer and report to shareholders," he said.

Mr Craig said the independent adviser's valuation did not fully reflect the Comvita directors' view of the potential and, therefore, the value of the company.

"We believe our current growth strategies built on product innovation, enhance supply chain and control of our channels to market are starting to deliver significant and increasing returns to shareholders."

He said the Cerebos offer placed little value on the development of the business in the past few years.

Cerebos New Zealand, the takeover vehicle, yesterday expressed surprise at the range of the independent valuation ($3.40-$4), given that Comvita's share price was trading at $1.75 on August 26.

That was the day Cerebos executives approached Comvita, saying it was interested in buying the Comvita.

Since the offer emerged last month, the shares have climbed 38 per cent to $2.90. That makes the offer a 16 per cent discount to the current trading price.

Last week, Comvita reported a first-half profit of $2.2 million, turning around a loss of $2.2 million a year earlier.

The offer came 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 ($472,464) payment.

Comvita expects annual profit of between $7.3 million-$8.2 million, with sales likely to be between $91 million-$95 million. In its bid, Cerebos pointed out Comvita had missed meeting forecast guidance in the past four financial years.

Singapore-listed Cerebos Pacific would delist Comvita if it wins 90 per cent of acceptances, the minimum level needed to force compulsory acquisition.

If it falls short but declares the bid unconditional with at least 50 per cent of the company, 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.

Sister company 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.

Comvita develops and manufactures products in the health food, skincare and woundcare categories, and manuka (leptospermum) medical honey is at the core of the product range.

The company exports to 14 countries through a network of wholesale and third-party outlets, and 470 branded retail outlets throughout Asia.

Comvita has has offices in New Zealand and overseas.