Pressure on Comvita to deliver

The likely failure of a takeover bid for Comvita will put pressure on the listed health and skin-care company to deliver results.

Singapore-listed Cerebos is offering $2.50 each for all shares in Comvita - up to 60 per cent less than a $3.40 to $4 valuation by independent adviser Grant Samuel.

Independent directors of Comvita, known for its Manuka honey products, have advised shareholders to reject the bid, which they called unwelcome and opportunistic.

Cerebos yesterday said it would not increase it's offer, which is due to close on December 22.

Comvita's independent directors said they expected the offer would lapse. Comvita chairman Neil Craig said the independent adviser's valuation did not fully reflect the company's view of the potential and the value of Comvita.

"We've transformed this company over the last five years in terms of product range, in terms of control of our distribution, control of our supply chain, these are very, very significant changes," Craig said.

The forecast for normalised profit of $7.3 million to $8.2 million for the year ending next March 31 still stood and the company expected that to grow in 2013, Craig said.

However, the company has said variable earnings had impacted the confidence of the independent adviser in accepting forecasts beyond this year.

"It puts a spring in our step and a focus to absolutely do that," Craig said.

"I suppose it's a shot across our bows to start rewarding the shareholders appropriately," he said. "We need to start really delivering on the bottom line but we're poised to do that."

Cerebos' offer equated to a price-to-earnings multiple of 9.6 times the midpoint of forecast 2012 earnings of 26c per share, Comvita said.

The mid-point of the independent adviser valuation range of $3.40 to $4.00 a share equated to a multiple of about 14 times, which was slightly below the average multiple of the market of about 15 for this financial year.

"Comvita is a considerably better than average company," Craig said.

"If we deliver the earnings we say we're going to deliver for this year, hopefully, the stock will be re-rated as being at least an average New Zealand company."

Cerebos Gregg's chief executive George Crocker said the decision not to increase the offer price followed careful consideration of all the factors investigated, as well as the independent adviser's report.

"The Cerebos offer was priced on our understanding of the risks inherent in the operations of Comvita and the manuka honey industry and the risks and costs associated with achieving continued growth in Asia," Crocker said.

"In our view, these factors do not justify a price anywhere near the valuation range indicated by the independent adviser's report."

Comvita's shares closed steady at $2.75 yesterday.