Elixinol (ASX: EXL) has doubled down on the CBD pet products market by acquiring a 25 per cent stake in Altmed Pets (aka Pet Releaf), a leading US pet brand.
Elixinol will pay Pet Releaf US$4.4 million in cash and US$1.9 million in Elixinol scrip for the chunk of the company.
Pet Releaf is a pioneering company for hemp-derived CBD oils, topicals and treats for pets. The company's products are currently sold in over 4,000 pet stores throughout the USA and in multiple international markets.
The two have already been closely connected, with Elixinol the exclusive supplier of CBD extracts for Pet Releaf's products since inception. Pet Releaf was in fact a foundation customer of Elixinol after both businesses commenced around the same time in 2014.
The majority of the funds received from Elixinol will be utilised by Pet Releaf to fund working capital and scale the business, allowing the US company to introduce new product lines and increase capacity in its new 25,000 square foot production facility.
Elixinol president Gabriel Ettenson says the investment in Pet Releaf will enable the company to ride the wave of CBD for pets.
"Hemp-derived CBD pet products are a rapidly growing category and one which Elixinol customers have a strong interest in," says Ettenson.
"We've long enjoyed our relationship with Pet Releaf. This deal strengthens our supply agreements and mutual synergistic distribution networks. It ensures Pet Releaf products, which so many dog and cat lovers rely on, will have scalability and ongoing quality of supply."
In FY18 Pet Releaf generated around US$8.1 million in revenue, up significantly from $2.8 million in the year prior.
The US company recently achieved its 16th consecutive revenue growth quarter and 16th consecutive best quarter ever in the company's history.
President and co-founder of Pet Releaf Stephen Smith says the two companies are well suited for each other.
"Pet Releaf and Elixinol share the same values in sourcing and end-product superiority," says Smith.
"This partnership of two best-in-class companies means Pet Releaf will gain additional working capital to be able to expand our reputation for innovation, increase our scientific and international expertise, while still maintaining our 'from seed to sale from plant to pet' approach."
This latest investment from Elixinol comes just after the group announced that its revenue fell by 31 per cent in the first three months of 2019.The company notched record sales in the US from Black Friday and Cyber Monday activity, but the strategic withdrawal from private label services ultimately impacted the bottom line for the period.
Shares in Elixinol are down 3.36 per cent to $4.89 per share at 10.19am AEST.
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