TIDMKNB
RNS Number : 2756R
Kanabo Group PLC
04 November 2021
Kanabo Group PLC
("Kanabo" or the "Company")
Update on Acquisition of Materia
& Further Investment
Further to the announcement of 26 July 2021, Kanabo Group Plc
(LSE:KNB), a medical cannabis R&D Company that focuses on the
distribution of cannabis-derived products for medical patients and
wellness CBD consumers, announces that it has finished the majority
of its due diligence work as part of the proposed acquisition of
the European businesses of 11157353 Canada Corp. (the "Proposed
Transaction"), which trades under the name of Materia
("Materia").
Kanabo and Materia have therefore signed a revised term sheet
which includes binding elements ("Head of Terms"), and the parties
consider this to be an important step towards completion of the
Proposed Transaction. As previously announced, the Proposed
Transaction contemplates the full acquisition of Materia's European
business, including its Maltese EU GMP certified facility, German
medical cannabis wholesaler and UK CBD e-commerce platform.
HIGHLIGHTS
-- Agreement reached on majority of commercial terms of the proposed acquisition;
-- Due diligence on Materia substantively complete;
-- All share acquisition agreed, valuing Materia at CAN$20MM
initially (c.GBP12million*), with up to an additional CAN$40MM
(c.GBP24million*) payable in new Kanabo shares, upon attainment of
post completion performance milestones;
-- B oth the Initial Consideration and the Earn-Out
Consideration to be satisfied through the issue of new ordinary
shares in the Company ;
Update of the Proposed Acquisition
Kanabo has completed the majority of the due diligence on
Materia and commenced the work on the regulatory documents required
to complete the Proposed Transaction. The Parties have also begun
planning the integration of the companies once the transaction is
completed.
Whilst this announcement contains details of the Term Sheet, the
Proposed Transaction is still subject inter alia to the agreement
of formal documentation and conditional on, among other things, the
receipt of all necessary regulatory consents.
The Consideration:
The Head of Terms states that the consideration for the Proposed
Transaction, which will be subject to the execution of the Share
Purchase Agreement and completion, will be satisfied via an initial
payment of CAN$20m ( c.GBP12million*) (the "Initial
Consideration"). In addition to the Initial Consideration, Materia
will be paid an additional consideration of up to CAN$40m (
c.GBP24million*) , subject to achieving certain operational and
financial milestones (the "Earn-Out Consideration") including, but
not limited to:
-- Commercial production of two total products in Materia Malta;
-- Sales in a new market beyond Germany and Malta;
-- Malta production facility reaching a breakeven point.
-- Sales of CANS$30million (c. GBP 17.73million*) for the 12-month period to December 31, 2022;
-- Sales of CAN$50miliion (c. GBP 29.55million*) for the
12-month period to December 31, 2023; and
Both the Initial Consideration and the Earn-Out Consideration
are to be satisfied through the issue of ordinary shares in the
Company.
Loan Facility:
In connection with entering into of the Term Sheet, Kanabo will
advance to Materia a further loan of CAN$500K (c.GBP295K*) in
parallel with a CAN$500K (c.GBP295K*) investment to be advanced by
a major shareholder of Materia. This Kanabo loan will form part of
a C$3M (c.GBP1.77million*) credit facility (the "Credit Facility")
to be drawn down in certain tranches based upon agreed uses. If for
any reason the Proposed Transaction does not complete within six
months from the date of the last tranche advanced under the Credit
Facility, Materia will pay 10% interest to Kanabo per annum from
the date of drawdown until full repayment of the Credit Facility,
and under certain circumstances, Materia will be responsible to
reimburse a portion of Kanabo's costs incurred through the
acquisition process.
About Materia:
Materia's medicinal cannabis assets include its Maltese, German,
and UK subsidiaries ("Materia Malta", "Materia Germany", and
"Materia UK" respectively). Materia Malta operates a European Union
Good Manufacturing Practices ("EU GMP") certified facility, through
which Materia Malta is able to import cannabis flower from its
global supply network of cultivators and process it into EU GMP
certified medical cannabis products. The Company anticipates that
Materia Malta will be particularly well placed to process any new
extracts developed by Kanabo. Materia Germany is a fully
operational pharmaceutical wholesaler, with EU GDP and EU GMP
certificates, enabling it to import and sell medical cannabis
products directly to thousands of German pharmacies. Materia UK
sells several leading CBD and wellness brands through Handpicked
CBD, which aims to be one of the UK's largest CBD e-commerce
marketplaces, and which now features Kanabo's own CBD line, as
announced on 22 September 2021.
Materia CEO Deepak Anand commented Materia, " 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 CEO Avihu Tamir commented, "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."
* based on the exchange rate of Canadian Dollar to Pound as of
2(st) November 2021.
For further information, please visit
http://www.kanabogroup.com/ or contact the following:
Kanabo Group Plc
Meirav Horn Via Vox Markets
Peterhouse Capital Ltd
Eran Zucker (Financial Adviser) Tel: +44 (0)20 7469 0930
Lucy Williams / Charles Goodfellow (Corporate Broker) Tel: +44 (0)20 7469 0930
Vox Markets (Investor Relations)
Kat Perez KanaboGroup@voxmarkets.co.uk
About Kanabo Group Plc
Kanabo Group Plc is an R&D company currently selling a range
of wellness CBD Products in the Primary Markets and Medical
Cannabis Products. The company's core strategy is to increase
revenues from the sale of its Retail CBD Products in the wellness
sector and to grow the Kanabo brand through its marketing
initiatives.
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END
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