Wattle Hill bids for Australia's Capilano Honey, targets China growth

The GP – which was co-founded by Albert Tse, an ex-Macquarie banker who is a son-in-law of former Australian Prime Minister Kevin Rudd – is partnering with fund-of-funds ROC Partners on the deal. They are willing to buy all outstanding shares in Capilano for A$20.06 apiece in cash or issue one share in the acquisition vehicle for each share in Capilano.

The offer represents a 28.2% premium to the August 10 closing price. The stock closed up 25.3% at A$19.62 on August 13. The Capilano board has recommended that shareholders vote in favor of the scheme of implementation agreement in the absence of a superior proposal.

Wroxby, a vehicle owned by Australian billionaire Kerry Stokes that is Capilano’s largest individual shareholder with a 20.6% stake, has indicated it will support the deal and subscribe to shares in the acquisition vehicle, also known as the scrip. This means the requirement for the scheme to proceed – that at least 15% of shareholders elect to receive the scrip – will be met. Separately, the scheme must be approved by 50% of all shareholders who vote and receive 75% of all votes cast.

“Our key aim is to enhance the position of Capilano’s brands in key domestic markets as well as drive expansion of brands in offshore growth markets, such as China, as a producer of premium Australian-sourced product. The focus will be on delivering innovative products with therapeutic and digestive health benefits in demand by Asian and Chinese consumers,” Tse said in a statement.

Founded in 1953, Capilano maintains a supply network of more than 600 Australian beekeeping families, producing honey that is sold domestically and in more than 30 overseas markets. In addition to classic, organic, creamed and premium honey, Capilano makes manuka honey, which is produced by bees using a kind of tree native to Australia and New Zealand and known for its healing properties.

There is already considerable Chinese demand for manuka – and the market has become so lucrative that last year a New Zealand trade association applied for exclusive rights to market manuka honey in five countries, including China, the US, the UK, and Australia. This prompted an angry response from Australian beekeepers.

Pacific Equity Partners acquired New Zealand-based Manuka Health three years ago and a sale process is now underway for the business, with Chinese groups reportedly among the interested parties. Other Chinese manuka acquisitions include Honey New Zealand, which was bought by Fortune Fountain Capital, a family office established by the descendants of one of China’s most famous calligraphers.

Wattle Hill launched its debut fund in 2016 with a target of $300 million and claims to have won backing from insurance groups in China and Europe as well as from Chinese family offices. Other investments include an Australian organic food supplier and Buderim Group, the country’s largest ginger producer. The latter deal was a joint effort with Chinese snack food company Qia Qia Food.

Capilano generated A$138.5 million in revenue for the 12 months ended June 2018, up from A$133.1 million in 2017. Over the same period, net profit fell from A$10.3 million to A$9.82 million.

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• Topics
• Australasia
• Greater China
• Buyouts
• Consumer
• Healthcare
• China
• Australia
• Wattle Hill
• ROC Partners