28 Sep 2015

Comvita invests in fish oil company

1:38 pm on 28 September 2015

Natural foods and honey company Comvita is investing a minimum of $2 million in fish oil producer SeaDragon, in order to get access to products.

Comvita is partially underwriting SeaDragon's three-for-five rights offer and will pick up the shortfall of the issue, which ensures SeaDragon reaches its minimum target of $5 million.

SeaDragon now has commitments of $7.5 million, which includes $2.5 million from its existing shareholder, BioScience Managers.

SeaDragon aims to raise a total of $9.09 million in new equity, which will be used to fund capital expansion and provide additional working capital.

Comvita chief executive Brett Hewlett said it was a strategic investment as refined fish oils played an increasing role in the company's product development.

"Omega-3 fish oils have become a core ingredient platform for Comvita, but until now we have not been able to consistently source local supply to establish a unique New Zealand-sourced range," he said.

SeaDragon and Comvita are also drawing up a supply agreement to give Comvita right of first refusal to all SeaDragon products, with a price based on market rates.

But Mr Hewlett said there would be plenty of product left to supply SeaDragon's other customers.

Once the deal is completed, Comvita will end up with a 20 percent stake of SeaDragon and a seat on the board.

Comvita also has a conditional option to buy $3 million of additional shares in SeaDragon at $0.008 each, in an all or nothing deal, which must be exercised within two years, and is subject to regulatory and shareholder approvals.

SeaDragon chairman Colin Groves said the two companies complemented each other.

"This investment commitment from Comvita is a big win for adding value to New Zealand's primary sector and a significant endorsement of SeaDragon's strategy," he said.

SeaDragon's bookbuild opens tomorrow.

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