Kanabo Group unveils proposed acquisition of Materia’s European assets
As reported by The Times on Monday, (LON:KNB ) announced the acquisition of the European businesses of 11157353 Canada Corp, known as ‘Materia’, in a deal which the Company said will make it Europe's biggest publicly traded cannabis company.
The medicinal cannabis firm focused on cannabis-derived products which made its debut on London’s main market in February 2021, said it has signed a non-binding term sheet for the proposed acquisition which is to be fully satisfied through the issue of Kanabo shares.
Kanabo will enter into an agreement to provide Materia with a loan facility of CA$2.5m (c.£1.4m) of which $0.5m will be advanced immediately, with the remainder available to be drawn down, subject to milestones, for 6 months from the date of the facility agreement.
The Israeli-based firm stated that the funds made available under the facility agreement will be used solely to support the funding requirements of Materia's European subsidiaries.
The proposed acquisition reflects Kanabo's ongoing efforts to actively explore new partnerships and opportunities to accelerate its growth and market penetration, it noted.
"The only part that we’re not involved in now in the supply chain is cultivation," Kanabo's Chief Executive Avihu Tamir told Yahoo Finance UK. "Our belief is that cultivation will be a commodity like other agricultural products. We believe the value is in the last mile."
According to Yahoo, Tamir said the deal was "significant" in size but Materia would be a minority shareholder post close. He predicted the transaction would close "very, very quickly."
The Board believes that Materia's complementary infrastructure will be crucial to expanding and strengthening its existing supply value chain of medical cannabis and CBD products.
Materia is an independent processor and distributor of medical cannabis and CBD wellness products focusing on the European market, with subsidiaries in Malta, Germany and the UK.
Following the acquisition, Kanabo will control production, from the initial sourcing of raw materials and in-house manufacturing, to distribution to pharmacies and the end consumer.
Since its flotation to the LSE, shares in Kanabo Group have seen an over two-fold increase from its entry price of 6.5p. Since Monday, shares in the stock have increased by over 10%.
Materia owns a cannabis processing plant in Malta as well as a wholesaling business in Germany, which currently stands as the largest market for legal marijuana in Europe. “It’s very unique because it allows you to make Malta the doorway to Germany and Europe in general,” Kanabo's chief executive Avihu Tamir said in an interview with Yahoo Finance UK.
According to City AM, Materia’s Malta facility is able to import cannabis flower from its supply network and process it into EU certified medical cannabis for European export and is worth some €36m, which will fall under Kanabo’s wing once the deal is completed.
Additionally, Materia owns a UK subsidiary ("Materia UK") which operates in the wellness sector as a distribution platform, selling several leading brands through Handpicked CBD, which aims to be one of the country’s largest CBD e-commerce marketplaces.
Kanabo said it will acquire direct entry into the German market, which was valued at over €200m last year, and is anticipated to remain the dominant market as the European market grows to a forecasted total size of €3.2 billion by 2025, according to Prohibition Partners.
According to reports from Reuters, Materia’s main focus to date has been on the German market, with Executives calling it “market number one, two and three” back in May 2021.
(Source: Reuters)
Kanabo said the acquisition’s consideration will be paid in two stages. The first payment will be made on the approval of the transaction and the second will be made subject to Materia achieving certain pre-agreed milestones, including sales of CA$30m within two years and certain key performance indicators such as the Maltese facility achieving breakeven status.
Kanabo’s CEO Avihu Tamir commented: "Materia's unique innovative supply chain will bring new production capabilities; it will provide strong distribution channels in the German market and offer new strategic agreements with premium cultivators around the world.
Together with Kanabo's R&D and commercialization capabilities, I expect this enlarged group to become the biggest public cannabis company in the UK and EU and puts us in a unique position as the multibillion-pound medicinal cannabis market begins to grow in Europe."
Materia’s Chief Executive Officer, Deepak Anand, commented: "As one of the first medical cannabis companies approved to list on the London Stock Exchange, Kanabo's ambition to be a market leader matches our own and we believe that our combined infrastructure will generate significant value for our shareholders, partners, customers and patients."
Last week, Kanabo Group told investors that it had passed a significant commercial 'milestone' with the shipment of its first medicinal cannabis cartridges to the UK.
Specifically, the group’s first shipment marked the first time a medicinal extract formula has been made available for inhalation by a metered-dose medical-grade vaporiser in the UK.
In a recent interview with CNBC, CEO Avihu Tamir discusses Kanabo’s listing on the London Stock Exchange and the market opportunity for medicinal cannabis in the U.K. and Europe.
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