Shineco Inc (NASDAQ: TYHT) announced a partnership with Heilongjiang Zhenye Agricultural Technology Development Co. Thursday to build the largest planting and processing base for industrial hemp in China and potentially acquire Zhenye Agricultural.
Shineco is a holding company that, through its subsidiaries, engages in vertically and horizontally integrated production, distribution, and sales channels for health and well-being plant-focused products in China.
What Happened
Through Tenjove NewHemp Biotech Co., its wholly owned subsidiary, Beijing-based Shineco entered into a strategic cooperation agreement and signed a letter of intent for a share purchase agreement with Zhenye Agriculture,
The strategic agreement implies that Tenjove NewHemp Biotech will provide Zhenye with planting techniques, training and guidance for industrial hemp, while Zhenye will provide land, equipment, labor, fertilizer, herbicides, insecticides, daily management and procedures.
All hemp products planted by Zhenye belong to Tenjove, and Zhenye will deliver the processed leaves and other parts to the designated warehouse.
Under the terms of the letter of intent for the share purchase agreement, Tenjove could acquire all shareholder equity, tangible assets and relevant information. If the deal is pursued, it will involve a combination of shareholder equity and cash, according to Thursday’s announcement.
Why It’s Important
Industrial hemp became legal in China in 2016 and the industry has seen rapid growth since then.
In 2017, sales of hemp in China amounted to $1.1 billion — nearly one-third of the global market — while by 2020 the market is expected to reach $1.5 billion, according to New Frontier Data.
Most of the hemp sold in China goes to the textile industry, unlike in other regions where hemp is mostly used to produce CBD.
As demand for hemp and CBD products grows, China has the ability to become an industry superpower.
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