Comvita renounceable rights issue raises $24.4m

Neil Craig

Bay of Plenty-based honey and health foods company Comvita has raised $24.4 million from its one for five renounceable rights issue, which closed this week, says chairman Neil Craig.

Under stage one of the issue, shareholders exercised 5.6 million of the rights at $3.55 per share, with 1.3 million rights not exercised or renounced by existing shareholders sold to institutional and retail investors under a shortfall auction bookbuild process managed by Deutsche Craigs.

"The response from eligible shareholders was right on the button in terms of our expecta-tions," said Mr Craig.

Deutsche Craigs director investment banking Jennifer Martin said the level of take-up was similar to other recent New Zealand renounceable rights offerings.

"It's been well supported," she said.

The rights issue was not offered to offshore shareholders. Smaller New Zealand-based shareholders who had not wanted to take up their rights let them lapse into the book build, rather than selling them on market during the rights trading, she said. That was largely because with small share parcels it was not worth paying brokerage fees to sell them. However, certain shareholders received a premium of 25 cents for shares sold in the book build process, which was strongly bid and reached $3.80 per share.

"It's seen as a fair mechanism delivering back value to those who don't participate," said Ms Martin. A similar approach was used by Deutsche Craigs for the Contact Energy and Argosy Property rights issues, she said.

Mr Craig said when the issue was announced that Comvita's growth and its acquisition and infrastructure investments over the past five years had largely been funded from operating cash flows, long and short term borrowing and the strategic investment made by Derma Sciences of $8.9 million made in September 2013.

The company also required increased working capital during the New Zealand spring due to the seasonal nature of the honey harvest, he said.

"This is because we must invest in inventory and beekeeping processes prior to our large northern hemisphere selling period for a significant proportion of our product range."

The capital raising would help address those issues.