Paul Robertshawe: Octagon Chief Investment Officer discusses failed Comvita takeover bid

A shareholder vote to approve a takeover bid for Comvita has not gathered enough votes to proceed.  

The bid from Florence to buy Comvita at 80 cents a share required 75% support from shareholders to go through.  

Although the official vote count has not been released, we know that the numbers fall short of the margin.  

Octagon Chief Investment Officer Paul Robertshawe told Heather duPlessis-Allan that anything is possible going forward, however it’s unlikely that Florence will raise their offer.  

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Episode Transcript

Speaker 1 (00:09):
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Speaker 2 (00:16):
So we've got potentially more trouble for the cash strap
honey company. Comveta Convita shareholders have voted today against the
takeover offer from Florence. The deal to buy Convita for
eighty cents a share needed three quarters support from shareholders
to go through. We don't have the official vote count yet,
but we know it was short of that margin. Paul
Robertshaw is the chief investment officer at Octagon Asset Management

(00:37):
and with US.

Speaker 3 (00:37):
Now, Hey, Paul, Hi, how are you doing?

Speaker 2 (00:40):
I'm very well, thank you. What happens now?

Speaker 3 (00:43):
Oh? I think in the board pointed out and its
presentation today, they've got to go back to the balance
sheet and look at the various ways that they can
remedy that because just waiting for operating improvement is probably
not going to be quick enough for the bankers, I
don't think.

Speaker 2 (00:53):
Yeah, because they've got a cash flow problem, right, So
do they have to sell some stuff?

Speaker 3 (00:57):
Yeah? I mean they've done a reasonable job liquidating inventry
and they've already sold some sup processes. I think they'll
try to do a bit more of that, but it's
not an easy environment for those things. So you know,
as they warned everywhere, the management team, the board, and
the independent report, the capital raises probably quite likely.

Speaker 2 (01:15):
Is it possible that the company could actually fold?

Speaker 3 (01:19):
Oh, anything's possible. I mean, if you can believe the
management strategy and the future EBIT, which I think they
reconfirmed earlier this week thirteen and a half for the
next year of that keeps growing and returns to something
like twenty million over time. I think it's got a
sustainable business. But you've got to get through the balance
sheet first.

Speaker 2 (01:37):
Is it possible that Florence could come back with a
raised offer?

Speaker 3 (01:43):
Again, anything's possible, But they've been pretty firm around this offer.
They are offering seerholders away not to dip into their
own pocket and let Florence deal with that. Yeah, So
they may decide there's not enough upside. I mean, what
was independent value ninety two cents. That's only fifteen twenty
percent upside from here from eighty cents, So maybe there's
not enough in it for them to raise the price.

Speaker 2 (02:02):
There was some talk of one of the co founders
putting together an alternative plan. Any sign of that yet, I.

Speaker 3 (02:08):
Would have loved to see it hither because it would
have given me some reason to think that he had
a better strategy than the board to one. But I've
seen nothing, so we're still waiting with baited breath on
that one.

Speaker 2 (02:18):
Paul, do you think that the shareholders have made a
mistake here?

Speaker 3 (02:23):
I'm not going to talk for other shareholders, but I
thought this was the best deal that was on the
table and likely to be on the table if they
raise money. Let's call it forty cents, when are UNI
it's going to see eighty cents on the shares you've
already got. I think a bird in the hand in
this case might well have been the right. Well, that
was our care and we were happy to support the bird.

Speaker 2 (02:41):
Now, how is it even that Conveta has ended up
in such a dire situation?

Speaker 3 (02:48):
Yeah, I mean, I guess they had a CEO and
you've got it back to the CEO. That's the way
companies work, and that strategy. But when it became clear
that China was slowing, that the market was a massive
over supply of honey hives doubled, nearly tripled at the peak,
you needed to change the strategy, and they've just been
far too slow. They tried to hold pricing, hold in
the trees. Probably needed to act far more aggressively in

(03:11):
the marketplace and around their own honey procurement two years ago,
two and a half years ago. So it's been it's
been in the works for a while and the market
hasn't hasn't got better or good enough to bail them out.

Speaker 2 (03:21):
Yeah, you sound exasperated, are you?

Speaker 3 (03:25):
It hasn't been a good investment for us, Heather. We've
been there for a while and it's it's a tear
added a lot, and we think putting more money in
without some well, you know, there is a strategy there,
but we're we're short on execution. That's a brand new
management team. They've got to deliver things. The market still
hasn't fully rebalanced in terms of inventory. You know, we're
taking more risk by not accepting the offer at eighty cents.

Speaker 2 (03:45):
Yeah, hey, thank you very much. I really appreciate you
talking us through that. Paul Paul Roberts LL, Chief investment
officer at Octagon Asset Management.

Speaker 1 (03:51):
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