Colombia’s largest cannabis producer to acquire Creso Pharma

Creso Pharma Ltd (ASX:CPH) was front and centre in the ASX pot stock space this week, announcing on Friday that it had received a takeover offer from Canadian cannabis company PharmaCielo Limited (TSXV:PCLO).

Creso Pharma, an early mover in human and animal cannabis-based products, is to be acquired by PharmaCielo, a best in class and well-capitalised global medicinal cannabis company.

Creso confirmed it is to be acquired for A$122 million at A$0.63 per share. This acquisition price is a 50% premium to CPH’s closing price on Thursday 6 June 2019 of A$0.42. Friday morning saw the stock gain 37% at the market open on news of the offer.

PharmaCielo, a TSXV listed cannabis company capped at C$675 million, is the Canadian parent of Colombia’s premier cultivator and producer of medicinal cannabis oil. It’s the country’s largest cannabis producer and a fully licensed producer of medicinal cannabis oil products in Colombia.

The proposed acquisition will combine the complementary cannabis companies to create a well-capitalised, publicly traded company with a strong growth profile and significant strategic advantages.

Creso Pharma Co-Founder and CEO Dr Miri Halperin Wernli described the deal as an incredible opportunity for Creso Pharma shareholders.

“The combined companies will offer a unique combination of assets and professional skills across the cannabis value chain that will lay the foundations for significant international expansion of cannabis products of the highest quality for the benefits of patients and consumers.

“The quality and scale of PharmaCielo’s cultivation and oil extraction operations in Colombia complements our focus on meeting global demand for the highest quality cannabis-derived therapeutic, nutraceutical and animal health products through increased access to the necessary quality and volume of oil production”.

The acquisition will be conducted through a scheme of arrangement between Creso Pharma and its shareholders and a separate concurrent scheme of arrangement between Creso Pharma and the holders of listed options. More details are available in the company’s Friday announcement.

Creso Pharma security holders will hold approximately 13% of the issued shares in the PharmaCielo following implementation, with PharmaCielo shareholders holding the remaining 87%.

Creso highlighted the benefits of the arrangement as follows:

• Creation of a vertically integrated supply chain: The acquisition will result in the combination of PharmaCielo, a global leader in terms of price, quantity and quality in cannabis cultivation, production and extraction, and Creso Pharma, an early mover in human and animal cannabis-based products, to create a vertically integrated supply chain.
• Experienced Board and management team: PharmaCielo benefits from the combined experience and expertise of its management team and board. PharmaCielo is led by top executives from an alumni of global companies and organisations including Philip Morris International, the World Health Organisation, Bayer, Citigroup, and American Express. The PharmaCielo board will be strengthened by the addition of Dr Miri Halperin Wernli, as a director of PharmaCielo.
• Expansion of cultivation and processing facilities: PharmaCielo will hold dual market licensed cultivation and processing facilities (in Canada and Colombia) allowing PharmaCielo to provide high-grade medicinal cannabis materials to multiple global markets.
• Expansion of commercial networks: PharmaCielo’s sales networks in South America, Mexico and Italy will add to Creso’s active commercial network and sales presence in thirteen countries, including Australia, New Zealand, Brazil, Switzerland, Germany, France, the Netherlands and the UK.
• Expansion of product portfolio: The acquisition will expand PharmaCielo’s on-shelf product portfolio with Creso Pharma existing products to be made available via PharmaCielo’s global market presence, especially in South America.
• Continued participation for Creso Pharma security holders: Creso Pharma security holders will retain continued participation in a global medicinal cannabis company with greater capitalisation enabling aggressive market and sale development.

PharmaCielo CEO David Attard says: “PharmaCielo’s proposed acquisition of Creso Pharma harnesses the synergies between us and creates a combined company poised to become a global powerhouse in the medicinal cannabis industry. Upon closing of the transaction the combined company will quadruple our global footprint with presence in more than a dozen countries spanning North and Latin America, Switzerland, Europe, the Middle East, Australia and New Zealand.

“The acquisition will afford us the opportunity to bring our high-quality Colombian oil production to market immediately and expand into higher-margin, branded product sales faster by harnessing the expertise of a proven and highly engaged commercialisation team possessing both an immediately available product portfolio and active international sales channels.”

Elixinol Global raised $50M to fund expansion

In other ASX cannabis news this week, Elixinol Global (ASX:EXL) raised A$50 million via an institutional placement.

EXL sells hemp-derived CBD dietary supplements, hemp food and wellness products, as well as the cultivation and manufacture of medicinal cannabis products.

Elixinol Global’s businesses include Elixinol LLC, Hemp Foods Australia, and Nunyara Pharma.

Elixinol LLC, a manufacturer and global distributor of industrial hemp based dietary supplement and skincare products, with operations based out of Colorado, USA.

Hemp Foods Australia Pty Ltd, a leading hemp food wholesaler, retailer, manufacturer and exporter of bulk and branded raw materials, and finished products; and

Nunyara Pharma Pty Ltd was founded in 2014 to participate in the emerging Australian medicinal cannabis market. Nunyara submitted licence applications for cultivation and manufacture to the Office of Drug Control in early 2018 which are currently pending approval.

EXL plans to use the funds raised to:

• Continue global expansion plans, with a particular focus on the USA CBD market;
• Provide general working capital funding required as part of continued expansion;
• Expand Elixinol’s production facilities in Colorado, USA by an additional ~23,000 square feet to more than double the company’s current production capacity; and
• Undertake opportunistic strategic acquisitions and enter joint ventures in select markets.

The company will issue approximately 12.8 million shares at A$3.90 per share, (an 8.7% discount to the 3 June 2019 closing price). This represents 10.3% of the company’s shares on issue prior to the placement.

Elixinol Global CEO, Mr Paul Benhaim, said: “I acknowledge the strong support of new and existing institutional investors to accelerate the Company’s expansion in the US and globally. We are witnessing an unprecedented positive shift in consumer appetite for CBD and hemp derived products. Elixinol plans to double its current production capacity in the US. Further, by securing additional raw materials, the Company will be well positioned to accelerate the growth of Elixinol branded CBD products and strategic opportunities.”