Bay of Plenty-based honey and health products company Comvita has signed a 51-49 joint venture with its long-term distributor in China, Shenzhen Comvita Natural Food Co. (SCNF), strengthening existing strong links between the companies.
Comvita's 51 per cent stake will be acquired by issuing 2.83 million shares at $10.60 pershare, valuing its stake at $30 million. On completion of the deal, the family of Zhu Guangping, SCNF's controlling shareholder, will own 10.07 per cent of Comvita, up from just over 5 per cent.
"SCNF has worked with Comvita for more than 12 years and the relationship is very strong, beginning with just two staff and now employing more than 200 staff throughout China," said Comvita chief executive Scott Coulter.
The SCNF-Comvita business has experienced a compound annual growth rate of 30 per cent since 2004 and Chinese customers ultimately consume approximately 60 per cent of Comvita's total sales, whether in China, or via tourists in Australasia, Hong Kong or other parts of the world, he said.
Comvita chairman Neil Craig said forming the joint venture had been a long-term objective, and the structure had been under discussion for 12 months. Comvita's distribution relationships differed from many in that SCNF only handled Comvita products, he added.
"The JV will bring us a lot closer to the market and participation in local pricing decisions," he said. "It will also give us a lot more incentive for us to increase our product range and move it down the distributor channel."
Mr Coulter said being on the ground inside China was a key building block to Comvita's future growth strategy. Comvita has a track record of building up exclusive distribution positions globally and then acquiring them back at the right time, he said, noting that the company had acquired its UK distributor in 2005 and its Hong Kong distributor in 2007.
"China is a much bigger and more extensive proposition and we chose to adopt a JV business model with our Chinese partner, who has a proven track record of achieving results on the ground."
SCNF is owned by 80 per cent shareholder Zhu Guangping, who also owns premium China Duty Free Group franchises. Mr Zhu's wife, Li Wang, an NZ citizen, currently owns 5.12 per cent of Comvita and on completion of the JV the Zhu family will own 10.07 per cent. The remaining JV shares will be issued to Lily Sun, SCNF's general manager and 20 per cent owner.
"I believe that Comvita can build on its premium position in China and continue its progress in being one of the leading foreign brands in the natural health food market," said Mr Zhu.
"I am also a believer in Comvita's global business opportunities."
