Mota Ventures Corp (CSE:MOTA) (OTCMKTS:PEMTF) said Friday that it inked a binding agreement with VIDA BCN LABS SL (Spain) and Sativida OU (Estonia) to acquire producer and online CBD retailer Sativida.
In a statement, the Vancouver, British Columbia, company said Sativida was a producer and online retailer of CBD and branded CBD products in certain jurisdictions in Europe, including Spain, Portugal, Austria, Germany, France and the UK.
Sativida sells organic CBD oils and cosmetics across Europe and is in the process of expanding its distribution network to include the US. According to the company, Sativida is the top search-ranked online retailer of CBD products in Spain and Mexico and plans to continue expanding its footprint in Europe and Latin America.
“We are excited to be at the forefront of the expansion of the CBD market in Europe and internationally. Currently, product availability and consumer awareness is in its infancy and the market is fragmented,” said Mota Ventures CEO Joel Shacker in a statement.
Shacker said the acquisition of an “established brand” such as Sativida is a “great opportunity” to get a toehold and expand into Europe.
“Using our newly formed and integrated infrastructure, we plan to rapidly capture market share and consolidate consumer bases across Europe. Sativida is the cornerstone for our entry into that market,” said Shacker.
Acquisition will proceed in stages
Under the terms of the transaction agreement, the Sativida acquisition will proceed in stages as certain corporate and intellectual property registrations are completed, said the company. Initially, the firm will establish a wholly owned Spanish subsidiary, and Sativida will coordinate the registration of various intellectual property and trade names associated with its business operations.
The Spanish subsidiary will then acquire the intellectual property and trade names of Sativida, and will license both back to Sativida in exchange for a royalty associated with the gross revenue generated by Sativida. Mota Ventures said it also holds the right to acquire, through the Spanish subsidiary all the outstanding share capital of Sativida at any time.
After completing the initial licensing arrangement, the company expects to provide Sativida with contacts to distributors and partners across Europe and North America to allow for expansion of the Sativida brand, as well as logistical and financial support.
The cost of the acquisition
Mota Ventures revealed the transaction will consist of an initial €2 million (US$2.2 million) and an earn-out component of three milestone payments based on Sativida’s revenue
The initial consideration will be payable in shares of the company, which will be determined by dividing the amount due by the lesser of (i) the volume weighted average closing price of the company’s shares on the Canadian Securities Exchange in the 10 trading days prior to Sativida obtaining the Spanish national trademark for Sativida; and (ii) CA$0.85.
Meanwhile, each milestone payment will be based on a multiple of Sativida’s revenue of 400% until the aggregate of the initial consideration and milestone payments reaches €4 million at which point the multiple will be reduced to 100%. In no event will the combined milestone payments and the value of the initial consideration exceed €15 million.
Payment of the milestone payments will be satisfied by the company issuing common shares to Sativida, said the company. The total number of milestone shares issuable to Sativida will be determined by dividing the amount due by the volume-weighted average closing price of the company’s shares on the Canadian Securities Exchange in the 10 trading days prior to the day that the milestone payment is due.
The consideration shares and the milestone shares will each be subject to a 36-month pooling arrangement such that 10% of the consideration shares, or the milestone shares, as applicable, will be released from escrow on their issuance, with an additional 15% being released every six-months until all consideration shares or all milestone shares, as applicable, are released.
Will retain some Sativida employees
As part of the deal, Mota Ventures will give employment contracts to some Sativida employees and will provide an option pool that may be divided among the employees of Sativida equal to €60,000 in stock options of Mota Ventures for every €1 million in revenue that Sativida earns, subject to certain conditions.
Additionally, Mota Ventures will pay a 10% finder’s fee on the total value of the consideration shares.
Completion of a licensing transaction with Sativida remains subject to the establishment of a Spanish subsidiary, the registration of certain intellectual property rights associated with the Sativida brand, the negotiation of a definitive license agreement and certain due diligence considerations, pointed out Mota Ventures.
The transaction is not expected to result in a “reverse-takeover” or “fundamental change” for the company under the policies of the Canadian Securities Exchange. The deal will not be a prelude to changes to the board of directors, or management at Mota Ventures, revealed the company.
Mota Ventures, based in Vancouver, British Columbia, aims to become a large-scale vertically integrated low-cost producer and exporter of CBD products globally.