SYDNEY, AUSTRALIA: AusCann Group Holdings (ASX: AC8) has entered into a Share Sale Agreement with Animal Health Holdings (AHH) to divest a 52% interest in its animal health business, CannPal Animal Therapeutics.

The partial divestment is a separate and independent transaction from the proposed transaction under Listing Rule 11.1 which is the subject of AusCann’s suspension from trading.

AusCann Group implemented a scheme of arrangement to acquire all of the shares in CannPal on the lath of March 2021. The transaction was expected to create a combined entity better able to accelerate the commercialisation of regulatory approved human and animal health products to offset headwinds resulting from the slower than expected uptake of the Special Access Scheme (SAS-B).

SAS-B is a distribution channel that was designed for low volume, and revenues by companies operating in the SAS-B channel are expected to remain small and unsustainable until the regulatory framework improves.

However, following a downturn in the market as a result of COVID-19, the Global Cannabis Stock Index fell by over 85% from the time of the transaction to current lows, significantly impacting the capital markets for Companies exposed to the Australian cannabis sector. Impacts to the macro-economic environment also slowed the development and commercialisation of the Company’s animal health assets.

This collectively led to an internal review of AusCann’s initiatives, including a strategic review of its animal health programs [ASX:AC8 March 18, 2021].

A formal process commenced in April, 2022, to explore opportunities to monetise its animal health assets through divestment or development and commercialisation partnerships. A data-room was established with an overview of AusCann’s core animal health assets, and some of largest animal health companies globally, were invited to participate in a targeted due diligence process. The process did not provide the AusCann Board with an acceptable proposal to maximise the value of the CannPal assets.