Comvita prepares to expand

Managing director Brett Hewlett says Comvita is ready to make purchases. Picture / Bay Of Plenty Times

Comvita's rights issue will slash debt and position the honey products maker for expansion, the company says.

The one-for-four renounceable rights offer, with an exercise price of $3 a share and aimed at raising $10.27 million, opened this week.

Previously, the Bay of Plenty-based company said it aimed to achieve turnover of $100 million by 2010, compared with $31 million last year.

Managing director Brett Hewlett said yesterday the rights issue would increase equity from about 40 per cent to 75 per cent of debt.

That would give the NZAX-listed company - which is to move to the NZX - greater capacity to raise new debt to fund purchases. It would also provide funding for other growth-related activities.

Chairman Neil Craig said Comvita had been thinking about several possible buys.

It hoped about half of the growth required to hit $100 million turnover would come from growth in existing business and the rest through acquisitions, Hewlett said.

Last month, Comvita announced a private placement of shares to Fisher Funds Management to raise $1.5 million. Fisher Funds already held 9.1 per cent of Comvita, and in a notice to the stock exchange yesterday said it had increased its stake to 12.3 per cent.

Craig said the rights issue was not underwritten because Fisher Funds' involvement was an "endorsement" of Comvita. And a decision to pay brokers' stamping fees on deals resulting from the take-up of rights would encourage them to alert clients.

Craig, also executive chairman of ABN Amro Craigs, said the broking firm's clients had a strong presence on Comvita's share register and it was now keen to encourage more liquidity in the stock.

Hewlett believed it was a "formality" Comvita's wound care products would get official US sanction, allowing it to get on with distribution. By 2010, the company hoped to have about 25 per cent of revenue coming from non-bee products.

Comvita uses New Zealand's clean, green image to market its products. Asked what threats the company faced, Hewlett said "not having enough money to grow, perhaps" and "any threat to the image of New Zealand could hurt us".

Comvita's closing share price yesterday was $3.35.