) said it has finished the majority of its due diligence work as part of the proposed acquisition Materia, a European-focused medical cannabis and CBD company.
The Israeli-based medicinal cannabis firm, which made its debut on London’s main market in February 2021, has signed a revised term sheet with Materia which includes binding elements.The parties consider this to be an important step towards completing the deal.
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.
The full acquisition covers Materials European business, including its Maltese EU GMP certified facility, German medical cannabis wholesaler and UK CBD e-commerce platform.
To date, Kanabo said agreements have been reached on the majority of commercial terms of the proposed acquisition with due diligence being ‘substantially complete’ by Materia.
Both parties have agreed an all share acquisition whereby Materia will be valued at CAN$20m initially (around £12million), with up to an additional CAN$40m (around 24million) payable in new Kanabo shares, upon the attainment of certain post completion performance milestones.
The milestones include, inter alia, commercially producing two total products in Materia Malta; acquiring sales in a new market beyond Germany and Malta, Malta’s ’production facility reaching a breakeven point and reaching sales of CANS$30m and $50m, respectively.
In addition, Kanabo will advance to Materia a further loan of CAN$0.5m (c.£0.29m) in parallel with a CAN$0.5m (c.£0.29m*) investment to be advanced by a major shareholder of Materia.
Commenting, Materia’s CEO Deepak Anand, told investors: “As the transaction has progressed the potential for the combined company to establish itself as a market leader has become even more evident. Materia’s and Kanabo’s assets are highly complementary and together represent a differentiated cannabis company poised to advance the industry.”
Kanabo’s CEO Avihu Tamir added: “We are very pleased with the progression of the transaction since the non-binding heads of terms were announced. I see the decision to merge with Materia as a strategic move that will allow a smooth expansion into our primary markets by solidifying our supply and distribution channels. We are confident that it will enable our enlarged group to lead the UK and German medical cannabis markets over the next few years and I believe it will fulfil our promise to shareholders to create significant revenue.”
