Friday 14th October 2011 1 Comment
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Shares of Comvita have surged above the takeover offer price from Cerebos Pacific, on speculation it may have to sweeten the proposal to win over shareholders, after Cerebos said it would offer $71.6 million, or $2.50 a share, for the company.
Cerebos says Comvita’s rejection of the bid as hostile is brinksmanship, and that the company allowed Cerebos to undertake due diligence last month.
Comvita rose 24% to $2.60, and touched $2.61, the highest in almost 2 ½ years.
Comvita chairman Neil Craig issued a statement on behalf of the company’s independent directors saying the approach was “unsolicited, unwelcome, opportunistic and your directors have reason to believe this offer undervalues Comvita by a considerable margin.” He urged shareholders not to sell.
However, George Crocker, the chief executive of local unit Cerebos Gregg’s, said the proposal isn’t hostile.
Singapore-listed Cerebos Pacific said it has been “studying Comvita from the outside” for two years and first approached the target in August, expressing interest in a takeover and seeking to do “limited due diligence,” he said.
Cerebos is especially interested in Comvita’s manuka honey and olive leaf health supplements and its ability to expand into Asia, where Cerebos has existing distribution channels for supplements including its Brand’s Essence of Chicken health product.“Manuka honey has the potential to be the same sort of thing,” Crocker said.
Comvita allowed limited due diligence last month and was very cooperative, Crocker said. Cerebos doesn’t currently hold any shares in the target.
Crocker said he isn’t surprised by the response of Comvita’s Craig. “The chairman’s role is to get as good a price as possible for the shareholders,” he said. Cerebos “reserved the right to increase its offer later in the process” but considers its current price to be “very good value for shareholders.”
Comvita first listed in 2003, trading on the NZAX market for small or unconventional companies. The shares have climbed 42% this year.
Comvita didn’t publicly disclose the initial approach from Cerebos in August. Last month the company raised its guidance for the first half to a profit of $2.2 million on sales of $41 million, up from the $400,000 and $37 million respectively in the same period of last year.
Crocker said Cerebos’s intention would be to leave Comvita largely as a standalone business as it had done with New Zealand coffee roaster and distributor Caffe L’Affare.
The offer is conditional on Cerebos reaching 90 percent acceptances to force the compulsory acquisition of the remaining shares, and let it delist the company. If it falls short and decides to declare the takeover unconditional, it will “seek appropriate representation on the Comvita board and will participate in decisions relating to Comvita and its future through the Comvita board,” according to the offer document.
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