Comvita improves honey supply line

Natural health products company Comvita New Zealand, under a takeover bid from Singapore-based Cerebos Pacific, has strengthened its long-term supply of manuka honey after buying an established Waikato apiary business.

Comvita has paid cash for Waikato Honey Products, which has 3500 beehives scattered through central North Island. The price paid was not disclosed.

"The business is set up like a beehive factory and is adept at splitting up the hives and increasing the numbers," said Comvita chief executive, Brett Hewlett. "They are also strong at rearing queen bees and have good land sites to carry the bees through the winter months."

Mr Hewlett said Waikato Honey would be able to double the number of its hives over the next few years.

"That's important as we develop more land for new manuka plantings, and we need more hives to go on to the sites."

Comvita, the biggest user of highly active manuka honey in the country, gets supplies from 50,000 contracted hives - and it now directly owns 8000 hives. It has another 5500 hives at its Kerikeri Kiwi Bee Apiary operation.

Mr Hewlett said 70 per cent of its honey "not owned by us" comes from 12 big producers.

"It's all part of a plan to double the supply of manuka honey over the next five years and we have to make sure we have the quality as well as the security [of supply]," he said.

Comvita is presently investigating up to 12 planting projects. It has selected elite manuka strains to suit different ground conditions, and it is talking with landowners about re-foresting.

Beehives are required within two to three years of the new planting.

Already Comvita, in conjunction with Hawke's Bay Regional Council, has planted a trial block of 4 hectares of manuka alongside Lake Tutira on the main road between Napier and Wairoa. This will increase to 140ha, producing up to 10 tonnes of manuka honey.

Another 17ha has been planted close to Raetihi with the target of reaching 300ha next year and producing ahout 20 tonnes of manuka honey.

Comvita's chief supply chain offer, Dr Nevin Amos, earlier told Business Times "we've been working nearly six years on a planting programme that's ready to roll and we are confident we will have sufficient area planted to more than match our demand".

He said the elite selections come from 11 different plants. "We can get more honey per hectare and also higher activity of honey that leads to greater value for the landowner, beekeeper and Comvita."

Meanwhile, Cerebos New Zealand - the takeover vehicle for Comvita - will next week send its formal offer to Comvita shareholders.

The offer, conditional on a 90 per cent acceptance rate, is $2.50 for every Comvita share, and has been described by Comvita directors as being "hostile and significantly under-valued."

In a letter sent to shareholders this week, Comvita chairman Neil Craig said the bid price placed "little or no value on our innovation and development of the business in the last few years."

George Crocker, chief executive of Cerebos' food and coffee division in New Zealand and Australia, confirmed the offer would be sent to Comvita shareholders next week - "we are hoping for Tuesday."

Mr Crocker said his company never intended the takeover bid to be hostile. "We presented ourselves and they gave us due diligence - that was all fine.

"It got acrimonious the moment we valued the company - it was worth $1.75 at the time and we offered $2.50. Despite questions of style, I give them [Comvita directors] the benefit of doubt and they are trying to protect shareholders' interest," Mr Crocker said.

"We all need to take a deep breath and see what the independent appraiser's report provides," he said.

The independent report will include a detailed summary on the merits of the Cerebos offer. It will be made available to shareholders, along with the independent director's recommendation, within 14 days of the formal takeover notice being dispatched.

The Comvita directors have told their shareholders: "Do not sell". They said there was absolutely no reason for shareholders to accept early.

"In fact, by accepting early, you could potentially be irrevocably locked into an offer from Cerebos and unable to accept any other offer at a higher price from a new bidder, should one come along," the directors said.