Latest / Best of Business / Oliver Mander: NZ Shareholders Association spokesperson on honey giant Comvita being offered a takeover bid

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Oliver Mander: NZ Shareholders Association spokesperson on honey giant Comvita being offered a takeover bid · Best of Business

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  Speaker 1: Heather Dupless out, So, a.
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  Speaker 2: Business associated with billionaire Mark Stewart has made a takeover
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  Speaker 2: offer for troubled honey exporter Convita. The offer is to
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  Speaker 2: buy all of the shares for eighty cents each, that's
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  Speaker 2: about fifty six point four million dollars in total. The
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  Speaker 2: conveter boarder supporting the office, saying this is the best
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  Speaker 2: way to get the business back on track. Oliver Amanda
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  Speaker 2: is the CEO of the Shareholders Association and with us Hey, Oliver,
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  Speaker 2: good evening, Heather, sounds like a good deal for shareholders.
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  Speaker 3: Do you agree, Well, it's a deal for shareholders. The
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  Speaker 3: I mean, certainly it reflects is just how much has
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  Speaker 3: changed to Convita over the past ten years. The share
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  Speaker 3: price the business was ten years ago, it was probably
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  Speaker 3: ten to twelve dollars thenk it picked at about twelve
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  Speaker 3: dollars during twenty sixteen, and that just reflects what's happened
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  Speaker 3: in the market since then. And you've seen this this
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  Speaker 3: glut of Manuka honey honey flood the market that's packed
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  Speaker 3: on margins more recently, that's the effected the company that's
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  Speaker 3: probably really creating this type of outcome for shareholders because
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  Speaker 3: it's probably says more about the company's debt levels than
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  Speaker 3: it does about shareholders. Wow.
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  Speaker 2: Okay, So is that the fall from twelve dollars a
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  Speaker 2: share down to about fifty cents? Is that mainly or
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  Speaker 2: completely because of the flooding of alternatives into the market.
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  Speaker 3: Look, that's likely to be the case. Yeah, So you
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  Speaker 3: saw that there's low barriers to entry into the market.
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  Speaker 3: You've seen a glut of monoca honey producers and supplies.
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  Speaker 3: We saw earlier this year we saw King Honey tipped
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  Speaker 3: into liquidation, which was owned as a subsidiary by another
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  Speaker 3: insittexlisted company. So yeah, that impacts obviously margins, but it
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  Speaker 3: also meant that a lot of the supplies, like conveter
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  Speaker 3: are carrying significant amounts of inventory and that stock that
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  Speaker 3: that's going to be funded by some thing or someone,
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  Speaker 3: And that meant that in Conveta's case, debt levels went
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  Speaker 3: up as well. So you've got higher debt levels and
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  Speaker 3: then that's compounded by reduced margins and losses, and all
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  Speaker 3: of a sudden, some of those what are called bank
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  Speaker 3: covenants started things that banks look at to make sure
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  Speaker 3: their debts are safe, they start to look pretty shaky.
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  Speaker 3: So the company has been working really hard recently to
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  Speaker 3: try to stabilize the business, cut costs, cut inventary levels,
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  Speaker 3: and negotiate with its banks in terms of saying, hey,
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  Speaker 3: we need some relief here to get us through this
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  Speaker 3: particular cycle. The board, they've obviously received this offer. I've
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  Speaker 3: obviously felt that that was probably represents better when more
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  Speaker 3: certain value now for shareholders compared to what the execution
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  Speaker 3: risk might be in future.
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  Speaker 2: Is it just me? I mean, tell me if I'm
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  Speaker 2: just if I'm imagining it, but it feels like there
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  Speaker 2: have been quite a few takeover offers lately.
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  Speaker 3: You're not imagining it. And I think one interesting thing
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  Speaker 3: for me is that whenever there's a takeover, of course
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  Speaker 3: yet maybe it's good for shareholders, but actually that means
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  Speaker 3: that someone else is seeing value in the business for
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  Speaker 3: whatever reason.
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  Speaker 2: But it'sous.
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  Speaker 3: Sorry, Careen Marks Stewart owns another honey business. There's clearly
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  Speaker 3: some synergy there that he's seeing in a you know,
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  Speaker 3: by looking at the operations of these two businesses and
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  Speaker 3: putting them together.
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  Speaker 2: Yeah, I mean, how do you feel about that though,
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  Speaker 2: in terms of a business is being taken off the market.
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  Speaker 3: Well, we don't love it. And if there was a
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  Speaker 3: pipeline of businesses coming into the market, we feel a
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  Speaker 3: bit better about it. But ultimately takeover is the ultimate sanction.
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  Speaker 3: You know, if a business isn't performing for whatever reason,
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  Speaker 3: then actually or or the sentiment around it is poor,
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  Speaker 3: the future outloka is poor, then obviously that does start
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  Speaker 3: to attract interest. And yeah, there's been some probably it's
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  Speaker 3: not just this year, of the last two to three years,
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  Speaker 3: it's probably been heightened activity in our market. You know,
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  Speaker 3: we've seen likes of pushpay Go, We've seen our Veda
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  Speaker 3: group to see peer the currently I think Vital Technology
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  Speaker 3: is a small Wellington based company. It's un to takeover
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  Speaker 3: offer by Tate of christ Church. So yeah, look there's
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  Speaker 3: there's it's ultimately the arbiter of shareholder value. So takeover
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  Speaker 3: is definitely play a role market, a really important role.
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  Speaker 3: But what's missing at the moment is that sort of
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  Speaker 3: front end activity to bring companies into market. And we
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  Speaker 3: think there's a lot more work required to get that
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  Speaker 3: balance right between private and public and the regulations that
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  Speaker 3: apply to each to make sure it's the level playing field.
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  Speaker 2: Oliver, while we've got you, how good is A two
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  Speaker 2: looking at the moment?
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  Speaker 3: Well, yeah, AA two is that the poll are opposite
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  Speaker 3: to what we've just described, certainly so today that they've
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  Speaker 3: announced that the purchase of the Schelly milk plants at
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  Speaker 3: Pocono two hundred nay two million dollars, and it's it's
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  Speaker 3: kind of in an easier position that they're in a
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  Speaker 3: good position to do this given the fact they have
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  Speaker 3: one point one billion dollars of cash sitting on their
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  Speaker 3: balance sheet, and that's up from nine hundred and seventy
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  Speaker 3: odd million last year I think. So this is a
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  Speaker 3: business that generates plenty of cash, but it has traditionally
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  Speaker 3: been capital light, so they haven't invested much in plant
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  Speaker 3: and equipment to support the sale of their product into China.
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  Speaker 3: So this does mark a bit of a step change
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  Speaker 3: for them. But had the investment in Matawa Valley Milk
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  Speaker 3: in Southland for some time that is loss making. Now
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  Speaker 3: this is still loss making, at least initially, so they're
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  Speaker 3: relying on growing the throughput through the new plant they've purchased.
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  Speaker 3: Through the it is a broad off as a broader
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  Speaker 3: suite of products and output compared to Matawa of value milk,
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  Speaker 3: and they're obviously banking on growing that to actually improve
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  Speaker 3: the efficiency of the plant and the amount of products
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  Speaker 3: that they can put through it. Good stuff.
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  Speaker 2: It's good to talk to you, Oliver. Really appreciate your expertise.
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  Speaker 2: Oliver Amanda New Zealand Shareholders Association CEO's for.
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