Cerebos defies Comvita’s price offer

The Cerebos takeover “is struggling for reasons of making a low-cost bid,” said Comvita chairman Neil Craig.

Cerebos, a multinational food giant known for brands like Bisto, Gregg’s and Raro, offered Bay of Plenty-based honey distributor Comvita $ 2.50 a share to see the independent valuation hovering between 3.40 $ and $ 4.

Yesterday, its CEO for Australia and New Zealand, George Crocker, said the assessment was “not credible” and that it could start to compete with Comvita rather than pay such a high price.

“Cerebos could just walk away and consider either acquiring another player or launching manuka honey products under its own ‘branded’ banner,” he said.

When asked how he assesses Cerebos’ competitive threat, Craig replied that he had given it no consideration.

“I’m not even going to go,” he said.

“I have no idea what these comments mean. They are struggling for reasons or excuses to bid on a low price. It is up to them to decide what they want to do in terms of their pricing. offer.”

Crocker said Cerebos is considering their next move but won’t increase their bid to $ 3.40 or more.

“We have to, at this point, decide what to do, because $ 2.50 is not going to allow us to be successful,” he said. “One option is to increase the price, but we certainly won’t increase the price to that of the independent appraiser. Range.”

The most immediate choice was to extend the offer beyond its December 22 closing date – a decision to be made before December 7.

Crocker said he agreed with a report released two weeks ago by Craigs Investment Partners analyst Selwyn Blinkhorne, the only analyst to cover the stock, valuing Comvita at $ 2.91.

As the chairman of Comvita is also a director of Craigs Investment Partners, Crocker said he was “a little skeptical about the potential for conflict. [of interest], but this [report] has been thoughtful and balanced. ”

Cerebos had spent two years researching Comvita and the manuka honey market, Crocker said, and believed he understood the business better than Grant Samuel.

At a press conference this morning, Crocker highlighted Comvita’s volatile results over the past four years, varying on a normalized basis from a loss of $ 3.7 million to a profit of $ 5 million.

The independent assessment was based on an increase in expected earnings for 2012 being sustainable over the long term, Crocker said.

“Comvita is used to not being able to meet his predictions,” he said.

Comvita forecasted its net profit for this year to be between $ 7.3 and $ 8.2 million on a normalized basis, a result that will require a strong second half after this month with normalized profit of $ 2.6 million as of first semester.

Blinkhorne said his analysis was conservative and did not include an acquisition premium.

“I can hit the $ 3.50 level quite comfortably,” he said. “The ball is in Cerebos’ court. They increase their offer or withdraw.”

Crocker said that when Cerebos initially approached Comvita on August 26, there was positive dialogue and then “when we made our offer things got acrimonious.”

No meetings with Comvita’s board were scheduled at this point, he said.

Craig said Cerebos had been told “in no uncertain terms” that its offer was too low.

During its yesterday afternoon share of $ 2.90, Comvita was on a price / earnings multiple of 11 compared to the NZX market average of 15, he said.

“It is totally inappropriate to think that they would manage to buy such a fantastic small company as Comvita well below the average m / e multiple of the market.”

Yesterday, the market seemed to see little chance of Cerebos increasing its supply, as shares fell 8c to $ 2.87, valuing the company at $ 81 million.

Comvita advised shareholders to ignore Cerebos’ offer.

Craig told BusinessDay that the board believed Comvita was on the verge of realizing the benefits of years of hard work.

“We think we’re ready to deliver and I know looking at our revenue history it doesn’t look like we’ve done it – there have been a lot of moving parts out there and those moving parts have all come together. installed. “

Comvita markets a range of products based on honey from manuka flowers. Last year, 47% of its sales came from manuka honey, 43% from products marketed as health products, such as olive leaf extract, pollen and colostrum.

Most of the rest came from sales of bulk honey and cosmetics. About 1% of sales came from Comvita’s wound care line based on the antibacterial properties of manuka honey.


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