Comvita forms joint venture with China distributor

Scott Coulter, chief executive of health food company Comvita. Photo / Greg Bowker

NZX-listed health food company Comvita and its distributor in China, Shenzhen Comvita Natural Food Co (SCNF) have formed a joint 51/49 per cent joint venture.

Comvita will be controlling shareholder through the issue of 2.83 million shares at $10.60 a share, worth a total of $30m.

The deal will see SCNF's owners raise their stake in Comvita to just over 11 per cent from 5.

SCNF has an extensive sales and distribution network in China including over 400 Comvita branded department store kiosks, as well as 35 branded Comvita stores in the major cities in China.

About one-third of SCNF sales are through e-commerce platforms including successful positions with Tmall and JD.com, and they also sell through a number of duty free stores at key border locations.

The acquisition is expected to be earnings accretive in its first full year of trading, disregarding any one off start-up costs, Comvita said. Shares in Comvita last traded at $10.40, up 40c from Friday's close.

SCNF has worked with Comvita for more than 12 years, beginning with just two staff and now employing more than 200 throughout China. The SCNF-Comvita business has experienced a compound annual growth rate of 30 per cent since 2004, Comvita said.

Comvita chief executive Scott Coulter estimated that Chinese customers ultimately consume about 60 per cent of the company's total sales, whether sold in Mainland China, or via tourists in Australasia, Hong Kong or other parts of the world.

Coulter said the deal represented the "continued evolution" of Comvita's partnership with SCNF and its owner, Zhu Guangping.

As well as being an 80 per cent shareholder in SCNF, Zhu is a franchise owner in China Duty Free Group, with premium locations of Zhuhai, across the Macau-China border, and Shenzhen, across the Honh Kong-China border.

Zhu's wife Li Wang, who is a New Zealand citizen, currently owns 5.12 per cent of Comvita, and upon completion of the JV, Zhu's family would own 10.07% of Comvita.

The remaining 566,000 shares to complete settlement would be issued to Lily Sun, the current general manager and 20 per cent owner of SCNF.

In a separate statement, Manuka Health, another major manuka honey producer, signed a three-year distribution agreement with Beijing-based Chao Pi Commercial & Trading.

Chao Pi will distribute the full range of Manuka Health NZ honey products to major retailers, and via online sales in China.

Manuka Health chief executive John Kippenberger estimated the agreement will see Manuka Health's exports to China equate up to a quarter of the company's volume within three years.

Chao Pi is the agent for more than 20,000 commodities and its distribution covers 20,000 retailers, as well as large online shopping providers.

Manuka Health NZ was bought by the private equity company Pacific Equity Partners in December 2015.