Cannatrek in reverse takeover of Little Green Pharma to tackle European medicinal cannabis market

After toying with plans for an ASX listing for several years, Victorian medicinal cannabis company Cannatrek has engineered a reverse takeover of Perth-based Little Green Pharma (ASX: LGP) to create a fully vertically integrated operation with distribution channels across Australia and Europe.

Little Green Phrama has agreed to acquire all of Cannatrek’s issued capital through a scheme of arrangement which will leave its shareholders with about 39.5 per cent of the merged group and Cannatrek shareholders with the remaining 60.5 per cent.

The deal, which brings together two of Australia’s largest medicinal cannabis companies, has been described as “transformational” by Little Green Pharma which has been gaining momentum in the European market.

The company says the merger, which will have net assets of more than $136.7 million, brings together operations spanning cultivation, GMP-certified manufacturing and packaging, distribution and clinic and digital health channels domestically and abroad.

The Melbourne-based Cannatrek, a manufacturer and distributor of medicinal cannabis products, has been eying an ASX listing as far back as 2019 but has subsequently raised capital via private equity including a $13 million funding round in 2022 led by River Capital.

“Cannatrek is one of largest and most successful medicinal cannabis companies in Australia, boasting a highly attractive product portfolio, diversified, vertically integrated business, robust balance sheet, and strong cash and EBITDA generation; and presents a wide range of potential synergies and growth opportunities for the combined group,” says Little Green Pharma’s managing director Paul Long.

“As the current Australian and global cannabis markets drive towards consolidation and greater maturity, this transaction will ensure the combined group emerges as one of the largest and most vertically integrated medicinal cannabis business globally and a leading player in the Australian and European markets.”

Based on FY25 results, the merged entity is expected to generate pro-forma revenue of about $112 million a year, an adjusted EBITDA of $13 million and cash of $15 million.

Little Green Pharma delivered revenue of $36.84 million and adjusted EBITDA of $2.9 million in FY25.

The company says the merger will create synergy opportunities by leveraging Cannatrek’s Australian GMP-certified manufacturing for the Australian market and Little Green Pharma’s GMP-certified manufacturing capacity in Denmark for European markets, as well as combining clinic operations and optimising cost and expense management.

The Denmark operation is the largest medicinal cannabis production facility in Europe which Little Green Pharma says currently has excess capacity available to support Cannatrek products headed for Australia and Europe.

Little Green Pharma adds that the strength of Cannatrek’s balance sheet will accelerate growth and scale operations in Europe which is expected to drive momentum for the group in the near term, leveraging forecasts that the region is set to become one of the world’s largest medicinal cannabis markets.

“Little Green Pharma has been a pioneer in the Australian market and showed great foresight in investing into the European market,” says Cannatrek’s chair Brent Dennison.

“We expect that by joining forces, we can enhance the profitability profile of the combined group in Australia with an ongoing emphasis on strong cash generation.

“This will assist the business to unlock the substantial growth potential that we see in LGP’s European operation.

“I anticipate that with the platform this merged entity creates, we will be active in the ongoing consolidation of the global medicinal cannabis market.”

The Cannatrek board, which represents about 22 per cent of Cannatrek shares on issue, has unanimously recommended the scheme, as has the board of Little Green Pharma which controls 13.1 per cent of shares in the listed company.

Shares in Little Green Pharma were trading 2c or 16 per cent higher at 14c at 10.52am (AEDT).