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Is Capilano Honey Ltd (ASX:CZZ) a takeover target for Bega Cheese Ltd (ASX:BGA)?

Although the market closed the day notably lower on Friday, this didn’t stop the Capilano Honey Ltd (ASX: CZZ) share price from surging over 5% higher to $21.00 in late trade.

This is all the more surprising considering the leading honey producer received a takeover offer from Bravo HoldCo in mid-August valuing the company at $20.06 per share.

Why did Capilano Honey’s shares surge higher?

According to a report in the AFR, the buyer of these shares may have been food giant Bega Cheese Ltd (ASX: BGA).

The report suggests that stockbroker Canaccord Genuity was in the market on behalf of Bega Cheese and willing to pay $21.00 a share. The broker got hold of at least 200,000 shares, which equates to approximately 2% of Capilano Honey’s issued equity.

Whilst at this stage nothing has been confirmed, I feel it would make sense for Bega Cheese to snap up Capilano Honey. I feel it has solid long-term growth prospects, is trading at a fair price, and would complement its current product range.

In other honey news.

However, it hasn’t been all good news for Capilano Honey shareholders over the weekend.

According to a report in the ABC, the honey producer and some of the country’s largest supermarket chains have been accused of selling fake honey.

The reports states that: “Testing at a leading international scientific lab that specialises in honey fraud detection has found that almost half the honey samples selected from supermarket shelves were “adulterated”, meaning it has been mixed with something other than nectar from bees.”

The company’s Allowrie-branded Mixed Blossom Honey, which uses honey from Australia and overseas, showed up as adulterated in the majority of samples tested.

Capilano has responded by strongly denying any issues with its products and has criticised the type of test used to detect the impurities. The company pointed out that it differed from the official Australian test and therefore may not be reliable. Shareholders will no doubt be hoping this doesn’t put off Bega Cheese from making a takeover offer.

ALDI, Woolworths Group Ltd (ASX: WOW), and Wesfarmers Ltd (ASX: WES) operated Coles were also found to have had adulterated honey on their shelves.

Should you invest?

While the takeover talk is a nice surprise for shareholders, I would suggest that investors keep their powder dry for the time being and wait to see if an offer materialises.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.