Kanabo seeks non-dilutive growth strategy with Materia partnership
[source: Kanabo]
(KNB ) has decided that a strategic partnership between itself and Materia, a European-focused distributor of medical cannabis and CBD wellness products, would better support its key strategy to commercialise medical cannabis products in the UK and Germany, whilst protecting its current shareholders from significant dilution.
The Israeli-based medicinal cannabis company, which made its debut on London’s main market just over a year ago, had originally intended to acquire the European businesses of 11157353 Canada Corp, also known as ‘Materia’, as part of its efforts to accelerate growth.
The rationale for the original acquisition was three fold:
- Ownership of the EU GMP certified manufacturing facility in Malta
- Ownership of a licensed medical cannabis wholesaler in Germany, giving Kanabo access to hundreds of pharmacies across Germany
- Accelerated scale with the combined entity able to rapidly commercialise new-to-market products for European patients and consumers
Today, however, Kanabo’s CEO Avihu Tamir outlined that the Board considers the all-share acquisition of Materia to no longer be in the best interests of Kanabo shareholders. He told investors that prevailing market conditions and other emerging alternatives have supported this decision to seek a Strategic Partnership with Materia, as opposed to a acquisition to be satisfied through the issue of Kanabo shares.
He stated: “This envisaged strategic partnership will directly support Kanabo’s key strategy which is the commercialisation of its medical cannabis products in the UK and Germany.”
Importantly, under a strategic partnership, Kanabo would be able to leverage Materia’s assets without exposing its shareholders to dilution and without needing to raise funds, it explained.
Under a proposed strategic partnership, the terms of which are now being finalised, Kanabo would receive access to Materia’s EU-GMP production facility in Malta through a contract manufacturing agreement and to exclusive distribution rights in the UK for its new products.
Arrangements for the servicing and repayment of the CAD$1m secured loan facility previously made available Kanabo to Materia will also be incorporated into the new strategic partnership.
Kanabo Group says further details of the proposed strategic partnership will be disclosed “in due course” and that updates regarding its operations and strategy will be incorporated within its annual results which are scheduled for issue on the week commencing 30 May 2022.
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While recent data from Morningstar show that assets managed by cannabis funds shrunk by 45% to $2.6bn in the 12 months to March, down from $4.6bn in the year prior. However, Kanabo remains one of the best performing shares on a relative basis with cannabis stocks on London’s main market falling between 60% and 80% over the past year.
Today’s news of a proposed alternative growth strategy that won’t expose its shareholders to further dilution has also received support from the market and provided some light relief for Kanabo investors, with the shares lifting to 4.21p during early morning trading.
In fact the new strategic partnership with Materia will directly support Kanabo’s commercialisation of medical cannabis products in the UK and Germany with direct access to Materia’s EU-GMP production facility in Malta.
Alongside its focus on product commercialisation, Kanabo is also focused on expanding its patient access to medicinal cannabis in the UK - these plans have already come into fruition with its recent £13.5m acquisition of the primary care telemedicine provider The GP Service.
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