Kanabo Group unveils proposed acquisition of Materia’s European assets

Francesca Morgan
Vox Newswire
06:50, 26th July 2021

Kanabo Group (LON:KNB FOLLOW) has announced its proposed acquisition of the European businesses of 11157353 Canada Corp, which trades under the name of Materia. 

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. 

Today’s proposed acquisition reflects Kanabo's ongoing efforts to actively explore new partnerships and opportunities to accelerate its growth and market penetration, it noted. 

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. 

Upon its acquisition, Kanabo will control production, from initial sourcing of raw materials and in-house manufacturing, to the distribution to pharmacies and the end consumer.  

The Company said this includes direct entry into the German market, which was valued at over €200 million 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, Kanabo reported. 

Since its flotation to the LSE, shares in Kanabo Group have seen an over two-fold increase from its entry price of 6.5p.  

KNB price chart

Materia's Maltese subsidiary, Materia Malta Operating Ltd., owns a European Union Good Manufacturing Practices ("EU GMP") certified facility which is ‘strategically positioned’ for the processing of medical cannabis flowers and oils. The facility's current flower throughput capacity sits at a potential 6,000kg per annum, representing a possible sale value of €36m based on a blended average sales price across several key European markets, Kanabo said. 

Meanwhile, Materia's German subsidiary, Materia Deutschland GmbH, which has deals in place with several suppliers and has been distributing medical cannabis products for over a year, is a fully operational pharmaceutical wholesaler, with EU GDP and EU GMP certificates, enabling it to import and sell medical cannabis products to German pharmacies.  

Additionally, Materia's UK subsidiary ("Materia UK") operates in the wellness sector as a distribution platform, selling several leading brands through Handpicked CBD, which aims to be one of the UK's largest CBD e-commerce marketplaces. 

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. 

Follow News & Updates from Kanabo Group here: FOLLOW

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