Eli Green Blat
Bega Cheese executive chairman Barry Irvin has bought himself a seat at the table with billionaire Kerry Stokes and agriculture investor Albert Tse over the future of honey producer Capilano after the dairy group ratcheted up its stake to 8.4 per cent in preparation for a takeover battle.
Mr Irvin, whose Bega Cheese last year secured the local Mondelez food business for $460 million to gain control of its Vegemite and peanut butter brands, said honey was a natural fit with his company’s spreads and Bega had the infrastructure to operate supply chains from farmer to retailer.
He said he was not put off by reports that Capilano could be unwittingly selling “fake honey” to consumers, along with other producers allegedly using adulterated honey, arguing this was precisely the type of food security issue that Bega was focused on.
“What that news demonstrates is what we talk about a lot in terms of the strategy of Bega — that people are increasingly worrying about where their food comes from, who is producing it, how it’s produced, sustainability, who is handling it and delivering it to them,’’ Mr Irvin told The Australia n. “And again, I would say that news is what we are very tuned into.
“What those (honey) articles have demonstrated is the path we are trying to take all of our businesses on, what we see increasingly customers want both here and around the world.’’
Bega dealt itself a hand at any battle for Capilano after grabbing a stake in the listed honey producer last week. It was prompted into action last month when a joint bid by two private equity groups — Australian-Chinese private equity fund Wattle Hill, led by Mr Tse, and ROC Partners investment fund, backed by Australian superannuation groups — launched a $20.06-a-share bid for Capilano, valuing it at more than $190m. The well-connected Mr Tse is married to former prime minister Kevin Rudd’s daughter, Jessica, an entrepreneur and investor in her own right.
Capilano’s largest shareholder is Mr Stokes’s family office investment vehicle Australian Capital Equity, which owns a 20.6 per cent stake, and the media mogul’s investment arm has indicated it would not sell its shares into the offer but retain scrip in a new private honey company, and take a board seat.
“We have expressed for a while that we are into natural products that are delivered to the consumer and really what we would call our stock in trade,” Mr Irvin said.
“Around that we have supply chains that go right back to the farmer or grower and we control that supply chain as much as possible right through to the end customer. (Capilano Honey) is a product that fits with our strategic approach.”
Leading the charge into Capilano’s share registry was corporate adviser David Williams and his Melbourne-based firm Kidder Williams, which has deep roots in the agricultural sector and has handled a number of high-profile deals recently.
Bottler Coca-Cola Amatil last month appointed Kidder Williams to advise it on the future of its struggling fruit cannery business SPC. It also advised on the $185m float of agricultural property investment group Vitalharvest.
Mr Williams has a long association with Bega, having advised on its sharemarket float in 2011 and last year’s $460m acquisition of the Mondelez food business.
Kidder Williams also spearheaded Bega’s grab of a strategic stake in then ASX-listed Warrnambool Cheese & Butter more than four years ago, with Bega sitting through the ensuing takeover battle and, although losing out to successful bidder Saputo, Bega sold its shares for a $100m profit, which Mr Williams has described as “not a bad consolation prize’’.
Mr Williams began buying shares in Capilano on behalf of Bega a few months ago, picking up stock for as low as $15.50 each and last Friday emerged with a stake of almost 6 per cent. Further buying has lifted Bega’s stake to 8.4 per cent this week.
The merchant banker secured the shares from fund managers who were happy to part with some of their holdings in the honey producer on the hopes it would give Bega enough momentum to trigger a takeover battle. However, Kidder Williams has made no promises in terms of Bega actually launching a takeover bid.
Mr Irvin said the takeover offer last month for Capilano pushed Bega to act and secure itself a say in the future of the group. “A way of being involved in the conversation is to take a shareholding and that is what we have done,” he said.
“At this stage we haven’t made any decisions around making a bid or anything like that. We would … say we are happy to be able to have accumulated a bit of a shareholding but haven’t made decisions beyond that.’’