THE rumour mills are buzzing as Bega Cheese confirms it has snapped up almost 6 per cent of Australia’s biggest honey business, Capilano, after spending about $5.38 million on the premium-priced stakeholding.
Fresh from announcing a 45 per cent jump in its normalised after-tax profit to $44 million, Bega has paid an average of $21.08 a share for a 5.76 per cent holding (544,356 shares) in the Brisbane-based former beekeeper co-operative.
Capilano was already preparing for a private investor takeover at $20.06 a share following an offer last month by private equity fund, Wattle Hill, and investment manager, Roc Partners.
Roc is a long-term Asia-Pacific based investor with $4.4 billion in pooled funds, while the two-year-old Australian-Chinese Wattle Hill business’ food interests include ginger and macadamia processor, Buderim Group, and goat milk producer and formula business, Bubs Australia.
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Capilano management is not commenting about Bega’s move at this stage, saying it has had no contact with the dairy and grocery player or any indication of its intentions.
However, Bega’s buying spree sent the honey company’s Australian Securities Exchange share price well above the Wattle Hill-Roc Partners syndicate offer, reaching $21.19 on September 5.
Capilano directors supported the Wattle Hill-Roc syndicate bid, on the proviso no higher takeover offer was received.
A shareholder vote is planned for November.
Bega’s a pretty shrewd operator – there’s a longer term strategy at play here.
Bega Cheese is also staying mute about its new-found taste for honey. However, market observers are speculating a bidding war could be on the cards given the synergies Capilano would have with Bega’s other recently acquired spreads brands, including Vegemite.
Alternatively, Bega may be keen to settle for a passive stake and a business partnership with Capilano, as it has done in the past to expand its dairy activities.
“Bega’s a pretty shrewd operator – there’s a longer term strategy at play here,” said a dairy market analyst.
Market speculation also tips Bega will seek out fresh capital from the share market to help cover the cost of its $250m July purchase of the 800m litre-capacity Koroit milk factory, in Victoria.
Increasing its capital raising plans to cover a bigger, or controlling, stake in Capilano may also be on the cards.
We have full confidence that Allowrie honey contains only pure honey.
Late last year Bega executed a friendly $12m takeover of Queensland’s Peanut Company of Australia in a bid to shore up supplies of raw peanuts for its new spreads and sauces division.
Earlier in the year it had begun its bold diversification push outlaying $460m to buy Kraft’s Australian and New Zealand spreads and dressings business from US food giant Mondelez.
Meanwhile, the honey industry is also abuzz with claims about the credibility of imported honey from China, after several supermarket chain brands and Capilano’s Allowrie mixed blossom honey were identified by overseas tests as potentially containing syrup ingredients not made by bees.
Capilano managing director, Ben McKee, criticised the method of testing commissioned by law firm King & Wood Mallesons, saying the results were inconsistent and different to Australian testing.
Dr McKee said the test relied on a database in which honeys local to Australia were under represented.
"We have full confidence that Allowrie honey contains only pure honey,” he said.