Capilano Honey

Mixed Updates: Capilano Honey Limited’s (ASX: CZZ) stock edged a bit low on September 04, 2018 while the honey industry is under the scanner as Capilano Honey’s Allowrie branded Mixed Blossom Honey is being stated to be adulterated in tests conducted in a German lab. CZZ is not the only player under the investigation, as IGA and Aldi have also been under the radar for the honey sold under different label brands. On the other hand, the company has recently strongly responded to the media and refused any concerns with its products mix and criticized the type of test used to detect the impurities.Further, the management stated that the company stands by its Allowrie honey as being 100% pure honey and the they do test on every batch.

Meanwhile, the group accepted to sell about 2% issued shares to Bega Cheese. Primarily, Bega Cheese Limited and its controlled entities bought 255,291 Capilano shares at an average price of $21.08 per share and hold 5.76% voting power in the company. Bega Cheese is now emerging to be one entity that is gaining interest on CZZ.

On the other hand, the group has entered into a Scheme Implementation Agreement with Bravo HoldCo Pty Ltd, under which is it proposed that a subsidiary of HoldCo will acquire 100% of the share capital of Capilano by way of a Scheme of Arrangement. If the Scheme is implemented then the Capilano’s shareholders will be entitled to $20.06 per share cash, which represents a premium of 28.2% to the last close of $15.65 per share and implies an FY18 P/E multiple of 19.3x and an EV / FY18 EBITDA multiple of 12.5x. The Scheme vote is proposed to be held in November 2018, with the Scheme execution proposed to happen in December 2018.


Financial Highlights (Source: Company Reports)

Meanwhile, the stock has risen 24.6 percent in the past three months as of September 03, 2018 and traded close to 52-week higher level. Based on foregoing, we maintain our “Hold” recommendation on the stock at the current market price of $21.01 while the group’s AGM is to be held in November and the story around takeover is still unfolding.
 

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