Comvita share placement lifts Chinese investor's stake to 9%

Manuka honey and health products company Comvita has placed some 2 million ordinary shares with China Resources Ng Fung, taking the Shenzhen-based Chinese food giant's stake from less than 5 percent to around 9 percent.

The move would "strengthen working capital and provide funding to support several strategic initiatives currently under consideration by Comvita," the company said in a statement to the NZX after close of trading today, and will give it access to the Chinese firm's huge distribution network, with thousands of Chinese supermarkets, and help smooth out supply chain volatility that have affected sales this year.

Comvita shares closed at $10.70, up 0.3 percent and 10 cents per share above the $10.60 value at which the placement was struck. The shares have risen 26 percent so far this year.

China Resources Ng Fung is a leading integrated food enterprise in China, wholly-owned by China Resources Enterprise Limited.

In a memorandum of understanding on co-operation in the Hong Kong and mainland China markets, Ng Fung will stock Comvita products in its stores and more than 4000 supermarkets belonging to affiliated retailers, and will assist with regulatory processes "where appropriate".

Comvita announced a joint venture distribution partnership in China last month and its partner in that agreement was fully supporting the latest initiative.

The Ng Fung deal would "allow Comvita to access potential channels into China for existing and future Comvita products which may otherwise be unavailable to Comvita" and reduce reliance on third party exporters, which have proven volatile in the last few months, but which remain "important for Comvita".

"China Resources Ng Fung is a highly reputable corporation," said Comvita chief executive Scott Coulter in a statement. "The executives respect our culture and the need for Comvita to be a New Zealand controlled business. We are comfortable from numerous discussions that the key executives of China Resources Ng Fung really do 'buy in' to our culture and values."

China Resources Enterprises chief executive Weiyong Wang welcomed the invitation to become "a substantial shareholder in Comvita".

"Comvita has been selling into China for 12 years and we hold the brand in the very highest regard. We believe retention of significant New Zealand ownership in the long term was and will continue to be a vital ingredient of the business."

(BusinessDesk)