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NAPANEE, Ontario and HOPE, British Columbia, July 31, 2018 (GLOBE NEWSWIRE) — ABcann Global Corporation (ABCN.V) (ABCCF) announced that it has entered into a definitive agreement to acquire 100% of the issued and outstanding share capital of Canna Farms Limited (“Canna Farms”), a premium cannabis company in British Columbia (the “Transaction”). 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.
Barry Fishman, CEO of ABcann was quoted as saying, “This is a transformational acquisition, and key benefits include increased production capacity, an expanded product offering, operational efficiencies, and a more robust platform to accelerate our growth. We will maximize operational and financial synergies, so that the combined company will be greater than the sum of its parts.”
The highlights of the deal include:
- increased scale with annual fully funded production capacity of 57,0001 kilograms. Multiple provincial supply agreements already secured;
- Multi-province production with indoor facilities in Ontario and British Columbia, extraction capability and expected GMP certification in Ontario by the end of 2018. As more provinces look at these operations as employment opportunities, facilities in two large-consuming areas may be advantageous;
- An expanded product line, including Canna Farms’ award-winning B.C. Bud and ABcann’s new Beacon, FIRESIDE and Lumina product lines;
- A strengthened leadership team with experience in all aspects of the business, including cultivation, product development, branding, capital markets, and demand creation;
- International exposure via Canna Farms’ Dealers License, combined with ABcann’s international partnerships and expertise. The company is looking at international markets, with a focus on Germany and Australia;
- Novel product offerings for both domestic and international markets;
- Enhanced market capitalization and strong cash position of $110 million, combined with Canna Farms’ positive operating cash flow and trailing adjusted EBITDA margins of 46%
Management states the transaction will be immediately accretive to ABcann. For the twelve months ending June 30, 2018, Canna Farms generated unaudited revenue and adjusted EBITDA2 of $9.4 million and $4.3 million, respectively. For the fiscal year ending September 30, 2017, Canna Farms generated audited revenue of $5.8 million and adjusted EBITDA2 of $2.8 million. The combined company is expected to benefit from anticipated yield improvements and cost and operational synergies.
The value of the Transaction is approximately $133 million, comprised of $22 million in cash and 92.5 million ABcann shares, based on ABcann’s 20-day VWAP of $1.20 as of July 27, 2018. The share consideration will be released from escrow in six month increments over 30 months.
Upon completion of the Transaction, the two co-founders of Canna Farms, Daniel Laflamme and Raymond Laflamme, will each own 16.1% of ABcann’s outstanding shares. They will remain with the combined company as President, Canna Farms and Senior Vice President, Facilities and Engineering, respectively. Daniel Laflamme will be appointed to the ABcann Board of Directors, increasing the total number of ABcann directors to seven.
The Transaction is expected to close in August 2018 and allows the two complementary businesses to leverage each other’s strengths prior to the opening of the adult-use market in the fall. The completion of the Transaction is subject to the satisfaction of customary closing conditions, including the conditional approval of the TSXV and applicable regulatory approvals.
1 Current capacity: Napanee, ON 1,500 KG; Hope, BC 2,700 KG; End of 2018: Napanee, ON 5,500 KG; Hope, BC 6,900 KG; Estimated mid-2020: Napanee, ON 32,500 KG, Hope, BC 24,500 KG
2 Adjusted EBITDA is earnings before interest, taxes, depreciation and amortization excluding any changes in fair value of biological assets.