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 (00:00):
So we've got potentially more trouble for the cash strap
honey company Comveta. Conveta shareholders have voted today against the
takeover offer from Florence. The deal to buy Conveta 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

(00:20):
and with us.

Speaker 2 (00:21):
Now, Hey, Paul, Oh, how are you doing?

Speaker 1 (00:23):
I'm very well, thank you. What happens now?

Speaker 2 (00:26):
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, yeah.

Speaker 1 (00:36):
Because they've got a cash flow problem, right, So do
they have to sell some stuff?

Speaker 2 (00:40):
Yeah? I mean they've done a reasonable job liquidating inventry
and they've already sold some supers assts. 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 and the management team, the board,
and the independent report the capital raiser is probably quite likely.

Speaker 1 (00:58):
Is it possible that the company he could actually fold?

Speaker 2 (01:03):
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 1 (01:20):
Is it possible that Florence could come back with a
raised offer?

Speaker 2 (01:27):
Again, anything's possible. But they've been pretty firm around this offer.
They are offering serholders 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 anything about 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 1 (01:45):
There was some talk of one of the co founders
putting together an alternative plan. Any sign of that yet.

Speaker 2 (01:51):
I would have loved to see it, Heather, 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 stillating with baited breath on
that one.

Speaker 1 (02:02):
Paul, do you think that the shareholders have made a
mistake here?

Speaker 2 (02:07):
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 1 (02:24):
Now, how is it even that Convetter has ended up
in such a dire situation?

Speaker 2 (02:31):
Yeah, I mean, I guess they had a CEO and
you've got it back 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.

(02:51):
They probably needed to act far more aggressively in the
marketplace and around their own honey procurement two years ago,
two and a half years ago. So it's 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 1 (03:05):
Yeah, you sound exasperated, are you.

Speaker 2 (03:08):
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 short on execution. It'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 in eighty cents.

Speaker 1 (03:28):
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 2 (03:35):
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