PE investors sweeten offer for Australia's Capilano Honey

Wattle Hill, which was co-founded by Albert Tse, an ex-Macquarie banker who is a son-in-law of former Australian Prime Minister Kevin Rudd, targets Australian businesses with products and services that appeal to Chinese consumers.

They initially offered 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 cash consideration has now been increased to A$21.00 per share. There is also a scrip offer that is unchanged: rather than receive cash, shareholders can choose to receive one share in the acquisition vehicle for each share in Capilano, plus the option to subscribe to 0.5 acquisition vehicle shares for each Capilano share at A$21.00.

The Capilano board had recommended that shareholders vote in favor of the original offer. Moreover, Wroxby – a vehicle owned by Australian billionaire Kerry Stokes that is the company’s largest individual shareholder with a 20.6% stake – had indicated it would support the deal and subscribe to the scrip. Trevor Morgan, the company’s chairman, said in a statement that the revised bid “represents an even better deal for Capilano shareholders.”

The stock closed up 3.5% at A$20.60 on November 1. As of early afternoon on November 2, it was at roughly the same level. Capilano shares were trading around the A$15.60 mark prior to Wattle Hill and ROC making their initial offer.

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.

Earlier this month, Pacific Equity Partners (PEP) agreed to sell Manuka Health, a New-Zealand based producer of premium honey, to Malaysia's Hong Leong Group. Several Chinese groups were also said to be pursuing the asset.

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
• Buyouts
• Consumer
• Australia
• Wattle Hill
• ROC Partners