Comvita blends well with SeaDragon

Neil Craig says New Zealand fish oils are premium quality.

Comvita will take a 19.9 per cent stake in Nelson company SeaDragon, giving the Bay of Plenty honey firm a secure supply of fish oil for a planned expansion of its range of health supplements.

Chairman Neil Craig said Comvita had long believed New Zealand fish oils could command a premium in international markets as the region was synonymous with clean, deep, blue oceans and high quality primary sector exports.

"Omega-3 fish oils have become a core ingredient platform for Comvita but, until now, we have not been able to consistently source local supply to establish a unique New Zealand-sourced range," he said. "SeaDragon, as New Zealand's largest refiner and blender producer of high quality fish oils, provides Comvita with long-term security of supply."

Comvita has agreed to participate in the shortfall bookbuild associated with SeaDragon's three-for-five rights offer, which is targeting a maximum of $9.09 million. The Comvita commitment, combined with $2.5 million already committed by SeaDragon's 21.8 per cent shareholder BioScience Managers, and other acceptances, will provide SeaDragon in excess of $7.5 million.

Each right entitles an investor to one share and one option. Comvita will invest between $2 million and $3.2 million, depending on the uptake, and will be scaled to ensure they reach their 19.9 per cent stake. Comvita will also be granted an option to buy three million shares at 0.8c each before October 1, 2017, subject to shareholder approval.

Comvita chief executive Brett Hewlett said it was a strategic investment as Omega-3 fish oils had become a core ingredient platform for Comvita.

SeaDragon said the new capital would be sufficient to meet its investment requirements for the immediate future, including the completion of its omega-3 oil refinery in Nelson, the addition of a fractionation plant at the refinery, the upgrade of its existing manufacturing facility, and working capital.

SeaDragon chairman Colin Groves said Comvita's commitment was a big win for adding value to New Zealand's primary sector and a significant endorsement of SeaDragon's strategy.

"It brings together two New Zealand-owned companies with complementary expertise to develop the greatest value from the country's precious primary resources," he said.

"Comvita, with its extensive international distribution network and premium brand image, particularly in fast-growing Asian markets, has the capability to make the most of this opportunity."

Comvita and SeaDragon have also undertaken to negotiate and enter into a supply agreement giving Comvita rights of first refusal to all SeaDragon products. The price for supply has yet to be agreed.

Mr Grove said Comvita would become a significant domestic customer, while its standing in New Zealand's export community and its contribution to the SeaDragon board would assist it to achieve its growth ambitions.

The companies said they were committed to working with the wider New Zealand fishing industry in the pursuit of maximising value from sustainably harvested local seafood resources. A Comvita representative will join the SeaDragon board after the completion of the rights offer.

SeaDragon

* New Zealand's largest refiner and blender of omega-2 and omega-3 fish oils.
* Based in Nelson.
* Has the capacity to produce 5000 tonnes of refined oil a year.
* Listed on the NZX.