Comvita - takeover talk.

Comvita - takeover talk.

Comvita is the subject of "due diligence" that could lead to the takeover of the New Zealand-based manuka honey supplier, the company revealed today (16 April).

In a statement to the New Zealand Stock Exchange, Comvita issued a note of caution for a key profit metric and said "the share price sensitivity of this forecast update" meant it was "obliged" to disclose the interest from the mystery suitor.

"Comvita is party to a confidentiality agreement with a third party, pursuant to a due diligence process currently being conducted on the company," the statement read. "This process, which has been ongoing for several months, is to enable the third party to assess the potential acquisition of all or substantially all the shares in Comvita, whether by way of takeover, scheme of arrangement, amalgamation or other business combination."

In a further statement provided to the New Zealand Stock Exchange, Comvita chairman Neil Craig said the due diligence was "moving towards a conclusion" but he underlined "the possible acquisition remains for now an incomplete transaction and there is no certainty that any offer will be forthcoming".

The interest that has come in for Comvita, he said, was "incomplete".

Craig added: "The board cannot provide any further comment or guidance at this stage, other than the fact we should expect to be in a position to further update the market by mid-May 2018.

"The third-party approach was, and remains, an incomplete proposal. Ordinarily this would not require disclosure at this time; however, given the content of the 2018 financial forecast update, the board believes it is obliged to also foreshadow this possible future development, to ensure shareholders are fully appraised as to the current prospects of the company."

Pointing to unfavourable recent weather conditions, Comvita is now expecting its after-tax operating earnings for the year to 30 June to be NZD8-11m (US$5.9m-8.1m).

CEO Scott Coulter said Comvita had already signalled in February when the company had published its first-half results that weather conditions "had not been conducive to good honey production".

He added: "The weather for the rest of February and early March continued to not be conducive to honey production and the anticipated late harvest did not eventuate. We have now completed 80% of the extraction for the season and tested 50% of our honey, and the yields are well below expectations; around half of what we originally budgeted. This poor harvest has a direct impact on our apiary business profitability for the current financial year ending 30 June 2018."

In the six months to 31 December, Comvita generated sales of NZD83.6m, up from NZD57.7m a year earlier.

The company said its first-half EBITDA stood at NZD9.9m, compared to NZD2.8m the previous year.

At that stage, Comvita forecast an annual, operating net profit after tax of "greater than" NZD17.1m.