LONDON, UK: Kanabo Group Plc signed a non-binding term sheet with 11157353 Canada Corp, which trades under the name of Materia, to acquire Materia’s European businesses, a news release said.

The acquisition is to be fully satisfied through the issue of Kanabo shares. As part of the Proposed Transaction, Kanabo will also make a loan facility available to Materia.

As part of the proposed transaction, Kanabo will enter into an agreement to provide Materia with a loan facility amounting to CA$2.5 million (approx. £1.4m), of which CA$500,000 will be advanced immediately, with the remainder available to be drawn down, subject to milestones, for 6 months from the date of the facility agreement.

The funds made available under the Facility Agreement will be used solely to support the funding requirements of Materia’s European subsidiaries.

Kanabo’s Board of Directors has been actively exploring new partnerships and opportunities to accelerate Kanabo’s growth and market penetration.

The Board believes that Materia’s complementary infrastructure will be crucial to expanding and strengthening Kanabo’s existing supply value chain of medical cannabis and CBD products.

Materia is an independent processor and distributor of medical cannabis and CBD wellness products focusing on the European market, with subsidiaries in Malta, Germany and the UK.

Following the acquisition, Kanabo will control production, from the initial sourcing of raw materials and in-house manufacturing, all the way to distribution to pharmacies and the end consumer. This includes direct entry into Germany, whose market size was over €200M last year, and is anticipated to remain the dominant market as the European market grows to a forecasted total size of €3.2BN by 2025.

It is envisaged that the consideration, which will be satisfied in full through the issue of Kanabo shares, will be paid in two stages. The first payment will be made on the approval of the transaction and the second payment will be made subject to Materia achieving certain pre-agreed milestones, including sales of CA$30 million within two years and certain key performance indicators such as the Maltese facility achieving breakeven status.

Materia’s Maltese subsidiary, Materia Malta Operating Ltd. owns a European Union Good Manufacturing Practices certified facility which is strategically positioned for the processing of medical cannabis flowers and oils.

EU GMP certification is considered the global gold standard for manufacturing pharmaceuticals and is a requirement for medical cannabis in most European jurisdictions. Through this facility, Materia Malta is able to import cannabis flowers from its global supply network of cultivators and process them into EU GMP certified medical cannabis products.

The facility’s current flower throughput capacity sits at a potential 6,000kg per annum, representing a possible sale value of €36M based on a blended average sales price across several key European markets. This capacity could also be expanded as market growth continues. Materia Malta also intends to utilise its facility and know-how to produce medical cannabis extracts in the near future.

Materia’s German subsidiary, Materia Deutschland GmbH, is a fully operational pharmaceutical wholesaler, with EU GDP and EU GMP certificates, enabling it to import and sell medical cannabis products to German pharmacies. Materia Germany has agreements in place with several suppliers and has been distributing a portfolio of medical cannabis products to pharmacy customers for over a year.

Additionally, Materia’s UK subsidiary operates in the wellness sector as a distribution platform, selling several leading brands through Handpicked CBD, which aims to be one of the UK’s largest CBD e-commerce marketplaces.

Kanabo CEO Avihu Tamir commented: “Materia’s unique innovative supply chain will bring new production capabilities; it will provide strong distribution channels in the German market and offer new strategic agreements with premium cultivators around the world. Together with Kanabo’s R&D and commercialization capabilities, I expect this enlarged group to become the biggest public cannabis company in the UK and EU and puts us in a unique position as the multibillion pound medicinal cannabis market begins to grow in Europe.”

Materia CEO Deepak Anand commented: “We are excited at the prospect of joining forces with Kanabo’s team. As one of the first medical cannabis companies approved to list on the London Stock Exchange, Kanabo’s ambition to be a market leader matches our own and we believe that our combined infrastructure will generate significant value for our shareholders, partners, customers and patients.”

Kanabo Group PLC share price

15.20 GBX+0.20 (1.33%)today

26 Jul, 8:00 am GMT+1 ·Disclaimer