Latest / Best of Business / Paul Robertshawe: Octagon Chief Investment Officer discusses failed Comvita takeover bid

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Paul Robertshawe: Octagon Chief Investment Officer discusses failed Comvita takeover bid · Best of Business

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  Speaker 2: So we've got potentially more trouble for the cash strap
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  Speaker 2: honey company. Comveta Convita shareholders have voted today against the
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  Speaker 2: takeover offer from Florence. The deal to buy Convita for
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  Speaker 2: eighty cents a share needed three quarters support from shareholders
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  Speaker 2: to go through. We don't have the official vote count yet,
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  Speaker 2: but we know it was short of that margin. Paul
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  Speaker 2: Robertshaw is the chief investment officer at Octagon Asset Management
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  Speaker 2: and with US.
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  Speaker 3: Now, Hey, Paul, Hi, how are you doing?
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  Speaker 2: I'm very well, thank you. What happens now?
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  Speaker 3: Oh? I think in the board pointed out and its
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  Speaker 3: presentation today, they've got to go back to the balance
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  Speaker 3: sheet and look at the various ways that they can
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  Speaker 3: remedy that because just waiting for operating improvement is probably
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  Speaker 3: not going to be quick enough for the bankers, I
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  Speaker 3: don't think.
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  Speaker 2: Yeah, because they've got a cash flow problem, right, So
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  Speaker 2: do they have to sell some stuff?
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  Speaker 3: Yeah? I mean they've done a reasonable job liquidating inventry
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  Speaker 3: and they've already sold some sup processes. I think they'll
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  Speaker 3: try to do a bit more of that, but it's
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  Speaker 3: not an easy environment for those things. So you know,
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  Speaker 3: as they warned everywhere, the management team, the board, and
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  Speaker 3: the independent report, the capital raises probably quite likely.
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  Speaker 2: Is it possible that the company could actually fold?
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  Speaker 3: Oh, anything's possible. I mean, if you can believe the
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  Speaker 3: management strategy and the future EBIT, which I think they
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  Speaker 3: reconfirmed earlier this week thirteen and a half for the
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  Speaker 3: next year of that keeps growing and returns to something
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  Speaker 3: like twenty million over time. I think it's got a
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  Speaker 3: sustainable business. But you've got to get through the balance
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  Speaker 3: sheet first.
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  Speaker 2: Is it possible that Florence could come back with a
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  Speaker 2: raised offer?
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  Speaker 3: Again, anything's possible, But they've been pretty firm around this offer.
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  Speaker 3: They are offering seerholders away not to dip into their
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  Speaker 3: own pocket and let Florence deal with that. Yeah, So
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  Speaker 3: they may decide there's not enough upside. I mean, what
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  Speaker 3: was independent value ninety two cents. That's only fifteen twenty
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  Speaker 3: percent upside from here from eighty cents, So maybe there's
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  Speaker 3: not enough in it for them to raise the price.
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  Speaker 2: There was some talk of one of the co founders
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  Speaker 2: putting together an alternative plan. Any sign of that yet, I.
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  Speaker 3: Would have loved to see it hither because it would
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  Speaker 3: have given me some reason to think that he had
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  Speaker 3: a better strategy than the board to one. But I've
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  Speaker 3: seen nothing, so we're still waiting with baited breath on
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  Speaker 3: that one.
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  Speaker 2: Paul, do you think that the shareholders have made a
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  Speaker 2: mistake here?
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  Speaker 3: I'm not going to talk for other shareholders, but I
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  Speaker 3: thought this was the best deal that was on the
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  Speaker 3: table and likely to be on the table if they
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  Speaker 3: raise money. Let's call it forty cents, when are UNI
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  Speaker 3: it's going to see eighty cents on the shares you've
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  Speaker 3: already got. I think a bird in the hand in
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  Speaker 3: this case might well have been the right. Well, that
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  Speaker 3: was our care and we were happy to support the bird.
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  Speaker 2: Now, how is it even that Conveta has ended up
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  Speaker 2: in such a dire situation?
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  Speaker 3: Yeah, I mean, I guess they had a CEO and
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  Speaker 3: you've got it back to the CEO. That's the way
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  Speaker 3: companies work, and that strategy. But when it became clear
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  Speaker 3: that China was slowing, that the market was a massive
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  Speaker 3: over supply of honey hives doubled, nearly tripled at the peak,
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  Speaker 3: you needed to change the strategy, and they've just been
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  Speaker 3: far too slow. They tried to hold pricing, hold in
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  Speaker 3: the trees. Probably needed to act far more aggressively in
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  Speaker 3: the marketplace and around their own honey procurement two years ago,
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  Speaker 3: two and a half years ago. So it's been it's
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  Speaker 3: been in the works for a while and the market
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  Speaker 3: hasn't hasn't got better or good enough to bail them out.
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  Speaker 2: Yeah, you sound exasperated, are you?
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  Speaker 3: It hasn't been a good investment for us, Heather. We've
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  Speaker 3: been there for a while and it's it's a tear
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  Speaker 3: added a lot, and we think putting more money in
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  Speaker 3: without some well, you know, there is a strategy there,
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  Speaker 3: but we're we're short on execution. That's a brand new
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  Speaker 3: management team. They've got to deliver things. The market still
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  Speaker 3: hasn't fully rebalanced in terms of inventory. You know, we're
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  Speaker 3: taking more risk by not accepting the offer at eighty cents.
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  Speaker 2: Yeah, hey, thank you very much. I really appreciate you
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  Speaker 2: talking us through that. Paul Paul Roberts LL, Chief investment
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  Speaker 2: officer at Octagon Asset Management.
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