ABcann Global has entered a definitive agreement to acquire Canna Farms, a premium cannabis company in British Columbia. Canna Farms was the first Licensed Producer in B.C. and has many years of craft cultivation experience and expertise, as well as a significant patient base and positive cash flow.

Transaction Highlights

  • Increased Capacity and Scale: Annual fully funded production capacity of 57,000 kilograms, with multiple provincial supply agreements already secured.
  • Diverse Production Capability: Indoor facilities in Ontario and British Columbia, extraction capability and expected GMP certification in Ontario by the end of 2018.
  • Expanded Product Line: With over 15,000 medical cannabis patients, the combined company plans to leverage strong anticipated recreational demand for premium products, including Canna Farms’ B.C. Bud and ABcann’s new Beacon, FIRESIDE and Lumina product lines.
  • Canna Farms’ Dealers License, combined with ABcann’s international partnerships and expertise, are expected to expedite the expansion strategy in international markets, with a focus on Germany and Australia.
  • Enhanced Financial and Capital Markets Profile: The enhanced market capitalisation and strong cash position of $110 million, combined with Canna Farms’ positive operating cash flow and trailing adjusted EBITDA margins of 46% are expected to result in a more robust capital markets profile.
  • The Transaction will be immediately accretive to ABcann. For the year ending June 30th, Canna Farms generated unaudited revenue and adjusted EBITDA of $9.4 million and $4.3 million, respectively.

Transaction Summary

  • The value of the transaction is approximately $133 million, comprised of $22 million in cash and 92.5 million ABcann shares
  • The deal is expected to close in August and allows the two complementary businesses to leverage each other’s strengths prior to the opening of the recreational market.

Outlook

Whilst we are still on the sidelines when it comes to ABcann, we are very favourable on this acquisition. ABcann is one of the oldest Canadian LP’s (in terms of when their license was granted) yet they have still not delivered any significant revenue. This acquisition will certainly help in that regard.

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