Elixinol to bag German CBD brand for $13.9m

Australian cannabis company Elixinol's (ASX: EXL) plans to push further into Europe will be accelerated via the proposed nine million-euro (AUD$13.9 million) acquisition of a leading German CBD brand.

The deal will see Elixinol acquire CannaCare Health GmbH, the owner of CANOBO and comes as cannabis-competitors ECS (ASX: ECS) and Little Green Pharma (ASX: LGP) make their own waves in the industry today.

If CannaCare attains FY21 revenues of 12.9 million euros and 20 per cent EBITDA, the maximum earn-out of 15 million euros is payable in Elixinol shares, making a total potential consideration of 24 million euros (AUD$37 million).

The acquisition is Elixinol's latest play in Europe and will see the Sydney-based company gain a serious foothold in Germany's fast-growing CBD market, forecast to grow to a total market size of US$600 million.

CANOBO already has an established presence in Germany too, with more than 4,500 bricks and mortar retail distribution points, and an extensive range of 20 products consisting of CBD oils, sprays and skincare products which are manufactured in Europe.

Elixinol expects the acquisition, which still requires shareholder and regulatory approval, to fast-track revenue and give it a path to profitability.

CannaCare delivered 2.6 million euros of revenue in FY20, with breakeven EBITDA.

At the maximum FY21 revenue earn-out threshold of 12.9 million euros, CannaCare would be contributing more than 100 per cent growth on standalone FY20 group revenue to Elixinol.

"We are incredibly excited about this transformational opportunity which leapfrogs Elixinol closer to its vision of becoming a profitable, global, hemp derived consumer goods wellness business," Elixinol global CEO Oliver Horn said.

"By acquiring CannaCare we gain a strong foothold in Europe's fastest growth market of Germany and, together with our established UK business, will become a leading pan-European business of scale.

"This acquisition enables us not only to quickly reach critical scale but importantly opens up new opportunities to cross sell our portfolios, leverage the new scale to reduce our cost of doing business and apply best practices across global business."

Importantly, the move comes after the United Nations Commission on Narcotic Drugs accepted a World Health Organisation recommendation to down schedule cannabis and cannabis resin.

This move is expected to lead to a novel foods regime for CBD being implemented across Europe - the world's second largest CBD market after the USA.

The acquisition will be funded by three million euros in cash, funded from existing cash reserves, and 6 million Euros paid by the issue of fully paid ordinary shares in EXL.

At 31 December 2020, Elixinol had cash reserves of $27.7 million.

Shares in EXL are up 10.26 per cent to $0.22 per share at 12.26pm AEDT.

ECS raising $6 million

In other medicinal cannabis industry news, ECS Botanics (ASX: ECS) has received firm commitments to raise $4 million through a share placement, and an additional $2 million via a rights issue to existing shareholders.

The company intends to use the funds to complete its acquisition of medical cannabis business Murray Meds, which has already received shareholder approval.

It will also be deployed to purchase plant and equipment to upgrade the value of ECS's cannabis material, for additional working capital, and to accelerate its market penetration plan.

Shares in ECS are down 6.67 per cent to $0.06 per share at 12.53pm AEDT.

Little Green Pharma buying land for cultivation expansion

Cannabis cultivator Little Green Pharma (ASX: LGP) will spend between $5.5-7.5 million on land in order to quadruple its cultivation capacity.

The land is two properties underlying its South West WA cultivation and manufacturing facilities, as well as two adjacent properties with a total land area of approximately 16,000 square metres.

The purchase is intended to service higher-than-expected international market demand for LGP's cannabis flower medicines, as well as the continued growth in demand for its medicines in domestic markets.

The announcement comes as LGP received a purchase order from German pharmaceutical wholesaler Deutsche Medizinalcannabis GmbH (DEMCAN).

Shares in LGP are down 1.43 per cent to $0.69 per share at 12.56pm AEDT.

Business News Australia