Bega confirms buzz on Capilano share deal

Bega Cheese has confirmed it bought a parcel of shares in Capilano Honey, which is already subject to a bid from elsewhere.

Bega Cheese has paid $5.38 million for 255,291 of Capilano Honey shares. (AAP)

Bega Cheese has added a smidgen of honey to its Vegemite, confirming the purchase of a stake in Capilano Honey and raising the prospect of a bidding war for the ASX-listed honey firm.

Bega says it paid $5.38 million for 255,291 Capilano shares on Friday, at an average of $21.08 per security, taking its stake in the company to 5.76 per cent.

Bega's purchase should make it the second largest shareholder in Capilano, which last month said it had received a bid from Australian-Chinese private equity fund Wattle Hill.

Capilano shares rose 0.24 per cent in the first 15 minutes of trade on Monday despite the company having been forced to defend the quality of its product amid reports the Allowrie-branded Mixed Blossom Honey it packages contained substances other than honey.

Managing director Ben McKee criticised the method of testing commissioned by law firm King & Wood Mallesons - the results of which prompted the ABC and Fairfax Media reports - saying the results were inconsistent and different to Australian testing.

Dr McKee said the nuclear magnetic resolution (NMR) test relied on a database in which honeys local to Australia were under represented.

"We call on the industry to work to prove up the NMR test so that it matches the robustness of results from other testing currently relied on internationally," Dr McKee said.

Meanwhile, Bega's latest buy continues an 18-month diversification push that has added a number of products to the dairy firm's pantry.

In January 2017, the company paid $460 million to buy most of Mondelez International's Australia and New Zealand grocery and cheese business - including the iconic Vegemite brand.

Bega then this year acquired the Peanut Company of Australia in a $12 million deal and completed the $250 million acquisition of Saputo's Koroit milk-drying facility in western Victoria, saying it would significantly increase capacity in butter, dairy nutritionals and milk powders.

Capilano shares were up five cents, or 0.24 per cent, at $21.05 at 1015 AEST on Monday, while Bega Cheese shares were down 18 cents, or 2.3 per cent, at $7.65.