- The transformative deal is expected to connect Flora Growth's (NASDAQ: FLGC) Colombian-grown cannabis directly with German-based pharmaceutical and medical cannabis distribution by creating a leading international, vertically integrated, seed-to-sale cannabis company.
- The transaction values FGH at approximately CA$42.0 million. Expected annualized cost savings of at least
US$3.0 million in general and administrative expenses realized through synergies and optimization for the combined entity. - The deal would establish a foothold in
Germany for medical cannabis sales across 1,200 pharmacies and the distribution of pharmaceutical products across 28 countries. This deal would provide additional upside shouldGermany proceed with the legalization of adult-use recreational cannabis. Franchise Global Health reported revenue of CA$30.1 million (US$23.4 million ) for the six months endedJune 30, 2022 . Total aggregated reported revenues of Flora Growth andFranchise Global Health Inc. for the six months endedJune 30, 2022 were CA$49.8 million (US$38.6 million ).- The proposed all-stock acquisition by Flora Growth of
Franchise Global Health will result in the indirect acquisition of its subsidiaries, including theHilzingen -basedPhatebo GmbH , a leading distributor of export pharmaceuticals and medical cannabis products to theEuropean Union and ACA MüllerADAG Pharma Vertriebs GmbH ("ACA Müller"), which holds the first German medical cannabis import and distribution license, which was granted in 2017.
"I would like to thank our shareholders for their patience over the past four years. This is an opportune time to invest in the cannabis sector with significant upside ahead. We plan to work hard to gain market share in the growing German cannabis market as global policy turns the corner", said
"Through this proposed acquisition, we are connecting our commercial infrastructure and medical cannabis product portfolio to the German and EU medical markets, while gaining direct access to European pharmaceutical distributions," said
FGH's German reportable segment achieved revenues of CA$30.1 million, gross profit of CA$2.1 million and net income of CA$0.4 million in the first half of 2022. FGH's German businesses operate primarily in the export pharmaceutical and medical cannabis import and distribution markets, servicing 1,200 pharmacies in
This acquisition is expected to accelerate Flora's expansion into the European cannabis and pharmaceutical markets with prescription medicines and would provide Flora with immediate access to a wealth of knowledge and intellectual property that FGH has developed, including 41 registered cannabis strains in
The combination of Flora and FGH is expected to deliver at least
"Luis and I share the same vision of establishing a leading and sustainable cannabis business. Flora has the right platform to execute on this strategy through M&A and organic growth. We are excited to join forces," says
Transaction Details
After the close of markets on
As consideration for the acquisition of 100% of the issued and outstanding FGH common shares, at the completion of the Arrangement, Flora will issue between 36,515,060 and 43,525,951 of its common shares in exchange for the issued and outstanding shares of FGH, as calculated in accordance with the Arrangement, which is based on a minimum exchange ratio of approximately 0.2441 Flora shares for each FGH share and a maximum exchange ratio of approximately 0.3235 Flora shares for each FGH share, depending on the number of FGH shares outstanding and the closing price of the Flora shares on the closing date, in each case as determined in accordance with the Arrangement. The Arrangement represents a total transaction value of approximately CA$40.0 million, based on Flora's 20-day VWAP as of market close on
In accordance with the terms set forth in the Arrangement Agreement, upon the completion of the Arrangement, all Flora common shares to be delivered to the former shareholders of FGH shall be restricted from being sold for a period of ninety (90) days following the completion of the Arrangement.
Upon closing the Arrangement, the former shareholders of FGH are expected to own between 32.06% and 36.00% of Flora's issued and outstanding shares, subject to dilution that may occur pursuant to permitted share issuances by Flora as provided for in the Arrangement Agreement. Flora does not own, directly or indirectly, any securities of FGH.
Completion of the Arrangement is subject to certain closing conditions customary for transactions of this nature including, among other things, approval of the Arrangement by the
The board of directors of FGH (the "FGH Board") unanimously recommends that FGH shareholders vote in favour of the resolution to approve the Arrangement at the FGH Meeting, which is expected to be held in December, 2022. The FGH Board has obtained a fairness opinion from
The Arrangement Agreement provides for, among other things, a non-solicitation covenant on the part of FGH, as well as a provision that entitles FGH to consider a superior proposal in certain circumstances, and a right in favour of Flora to match any superior proposal. If the Arrangement Agreement is terminated in certain circumstances, including if FGH enters into a definitive agreement with respect to a superior proposal, Flora is entitled to a break fee payment of $1 million. Subject to the satisfaction or waiver, as applicable, of the conditions to closing, the Arrangement is currently expected to close in late December, 2022.
In addition,
None of the securities to be issued pursuant to the Arrangement have been or will be registered under the United States Securities Act of 1933, as amended (the "
Additional Information
Full details of the Arrangement are set out in the Arrangement Agreement, which will be filed by FGH under its profile on SEDAR at www.sedar.com. In addition, further information regarding the Arrangement will be contained in a management information circular of the Company to be prepared in connection with the FGH Meeting. All shareholders of the Company are urged to read the Company's management information circular once it becomes available as it will contain additional important information concerning the Arrangement.
Financial and
Flora is building a connected, design-led collective of plant-based wellness and lifestyle brands, designed to deliver the most compelling customer experiences in the world, one community at a time. As the operator of one of the largest outdoor cannabis cultivation facilities, Flora leverages natural, cost-effective cultivation practices to supply cannabis derivatives to its commercial, house of brands, and life sciences divisions. Visit www.floragrowth.com or follow @floragrowthcorp on social media for more information.
Cautionary Statement Concerning Forward-Looking Information
This press release contains ''forward-looking information,'' as defined by Canadian securities laws. Forward-looking information reflect the Company's current expectations and projections about future events at the time, and thus involve uncertainty and risk. The words "believe," "expect," "anticipate," "will," "could," "would," "should," "may," "plan," "estimate," "intend," "predict," "potential," "continue," and the negatives of these words and other similar expressions generally identify forward looking information. Statements containing forward-looking information in this press release include, but are not limited to, statements with respect to the expected benefits and synergies resulting from the completion of the Arrangement (including anticipated savings in general and administrative expenses resulting therefrom), the strategy of the combined company going forward, the timing for the holding of the FGH Meeting and the completion of the Arrangement, and the consideration expected to be received by FGH shareholders, which may fluctuate in accordance with the Arrangement. Statements containing forward-looking information are subject to various known and unknown risks and uncertainties, including without limitation risks that the closing conditions to the Arrangement may not be satisfied, the Arrangement Agreement may be terminated and the Company may be required to pay termination fees and expenses due thereunder depending on the circumstances of such termination, if completed, the expected benefits from the Arrangement may not materialize, the combined entity will be subject to the general business risks and uncertainties affecting each of Flora (including those described under the section entitled "Risk Factors" in Flora's annual report on Form 20-F filed with the
Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in statements containing forward-looking information. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in the Company's public filings available on its SEDAR profile at www.sedar.com. While statements containing forward-looking information reflect management of the Company's good faith beliefs, they are not guarantees of future performance. The Company disclaims any obligation to publicly update or revise any forward-looking information contained herein to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes after the date of this press release, except as required by applicable law. You should not place undue reliance on any forward-looking information contained herein, which are based only on information currently available to the Company.
NEITHER THE
SOURCE
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