Comvita rally puts Cerebos offer in shade

Comvita has described the takeover offer from Cerebos as unwelcome. Photo / Supplied

Comvita New Zealand's share price rallied sharply yesterday, suggesting Singapore-based multi-national Cerebos Pacific may have to dig deeper into is coffers if it is to successfully take over the health and skincare products company.

The shares hit a 2-year high of $2.60 yesterday, well over Cerebos' $2.50 per share offer price. Shares closed yesterday up 45c at $2.55.

Cerebos, through its local unit Cerebos New Zealand, gave notice that it intended to make an offer for all 29.5 million shares in Comvita, valuing the company at $73.8 million.

The cash offer, which will remain open for 45 days, is contingent on Cerebos receiving 90 per cent acceptance. However, it has reserved the right to waive the minimum to any level greater than 50 per cent. At $2.50, the offer price is at a 25 per cent premium to the one-month average price over the last month.

Comvita chairman Neil Craig revealed in a conference call that Cerebos had made its intentions known a month ago.

"Cerebos notified us a month ago that they were interested in bidding for all or part of the company," he said.

"So we have had a dialogue with them. Did we expect a bid? - I suppose we anticipated that we would, but we were not certain that they were going to do it until 8pm last night," he said.

Cerebos, in its offer documents, attacked Comvita's financial performance over the years, and said it had regularly failed to meet its earnings guidance.

"The offer price is at an attractive share price premium and provides price certainty at a time when equity markets are subject to volatility due to concerns about global economic conditions," Cerebos said. Comvita's independent directors issued a "don't sell" notice.

"This offer by Cerebos is unsolicited, unwelcome, opportunistic and your directors have reason to believe this offer undervalues Comvita by a considerable margin," the company said in a statement.

Cerebos wants to take control of the company, which specialises in manufacturing manuka honey for medicinal use, and to operate it on a standalone basis.

Te Puke-based Comvita last month said it expected to report a net profit of between $7.3 million and $8.2 million, with sales likely to be between $91 million and $95 million, for the year to March 2012.

Comvita's biggest shareholder is co-founder Alan Bougen, who has 10.2 per cent, so Comvita's share register looks to be quite open.

Craig said Bougen's holding, together with the holdings of staff, other interests closely associated with the company and the Butt family Hong Kong, represented a voting bloc of around 30 per cent.

The company also had a large, loyal shareholder base in Bay of Plenty, he said. "It [the register] is a lot less open than it appears," he said.

Based on the company's forecast for 2011/12, the price offered by Cerebos put it on a price/earnings multiple of less than 10, compared with a market average of 14.5 to 15, making the offer "a nonsense", Craig said.

Cerebos's local brands include Caffe L'Affare, Bisto and Raro. The company recently invested $13 million to expand facilities in a joint venture at Mt Maunganui, and is spending $6 million on an instant coffee producing plant in Dunedin.

Comvita
* Makes health and skincare products using manuka honey.
* Based in Te Puke.
* Listed on the NZX's alternative market in 2004 and then went on to the NZX's main board in 2006.
* Biggest shareholder is co-founder Alan Bougen.
* Expects net profit of $7.3 million to $8.2 million in next financial year.