Cannabis Brief: Explosion of Cannabis Mergers and Acquisitions Predicted to Jump in 2019
Financialnewsmedia.com News Commentary
17 Apr, 2019, 08:45 ET
PALM BEACH, Florida, April 17, 2019 /PRNewswire/ -- In nature and business, the bigger fish always ends up eating the smaller fish. If the predictions are accurate, that is what is going to happen to the cannabis industry in 2019. A recent Forbes article had the following headline: "2019 Explosion Of Cannabis Mergers And Acquisitions Predicted." The article continued: "Most of the businesses growing, processing and selling cannabis across the United States are small independently-held entities. That may change in 2019 which looks like a big year for industry mergers, acquisitions and expansion. Large companies, like those in the food, tobacco and pharmaceutical industries have mostly stayed on the sidelines, held back by regulatory concerns, but are now expected to enter the market. The cannabis industry still has a mom and pop feel but that could change rapidly. A few have made that leap and are establishing footholds in states around the country. In 2018, some of the multi-state operators acquired additional licensed operators in new locations. By the end of the year, "We were seeing larger companies merge with one another," said (an industry insider). As the industry continues to grow and mature, he expects to see more of this consolidation in 2019. Multi-state operators aren't the only ones thinking about acquiring cannabis companies. As drug laws and regulations become less restrictive, it is widely believed that large tobacco, pharmaceutical, food and beverage companies will enter the marketplace. Active Companies from around the market with current developments this week include: Marijuana Company of America, Inc. (OTC:MCOA), Cannabis Strategic Ventures (OTC: NUGS), Aurora Cannabis Inc. (NYSE: ACB) (TSX: ACB), Puration, Inc. (OTC: PURA), Aleafia Health Inc. (TSX: ALEF) (OTC: ALEAF).
A member of Brightfield said the following in the Cannabis Business Times: "manufacturers are headed in this direction, aiming to compete with, or be acquired by, large corporations who have their eyes on the CBD space and who are ready to pounce come commercial hemp legalization. For these reasons, drinks are expected to be a huge CBD growth area, projected to jump from a $12 million market in 2018 to a $200 million-plus market in 2019 with a compound annual growth rate (CAGR) of 242 percent through 2022."
Marijuana Company of America, Inc. (OTCQB:MCOA) BREAKING NEWS: Marijuana Company of America an innovative hemp and cannabis corporation, is pleased to announce that the Company has officially acquired a 20% ownership interest in Natural Plant Extract of California (NPE).
Under the terms of the agreement, Marijuana Company of America has committed to contribute $2,000,000 in total cash to the project, as well as common shares of the Company with a value of $1,000,000. In exchange, the Company will own a 20% equity position in NPE. In addition, MCOA and NPE have also officially signed a Joint Venture Agreement (JV) to establish Viva Buds as a premier cannabis delivery company. Both NPE and MCOA will share in the profits on a fifty-fifty basis.
Viva Buds Inc. will serve as the marketing arm for NPE subsidiary Northern Lights Distribution's (NLD) new retail cannabis delivery service in California, first starting with delivery services to Los Angeles County and then rolling out to other major cities throughout the state. NLD will contribute up to $300,000 in inventory of cannabis products to assist in the start-up of this venture, and MCOA will provide a vast array of marketing services and technology to promote and build its Viva Buds brand.
NPE owns both state and city licenses for volatile manufacturing, distribution and retail delivery of cannabis products. NPE will manage all operations pertaining to distribution, manufacturing and delivery of cannabis products, and MCOA will provide capital, consulting and marketing services. NPE is currently operating as a distributor and is completing the build-out of its manufacturing facility, which is expected to be completed and fully operational in August 2019.
Regarding the acquisition, Alan Tsai, CEO of NPE, stated, "We are excited to be one of the first California licensed cannabis companies to partner with a publicly traded company in the US. We believe that partnering with an established company such as Marijuana Company of America will help to build Viva Buds and establish our foothold early by securing manufacturing and distribution contracts with key players in the California cannabis market. We expect that this strategic partnership will be mutually beneficial to both companies." Read this and more news for MCOA at: https://www.financialnewsmedia.com/news-mcoa/
In the industry developments and happenings in the market this week include:
Cannabis Strategic Ventures (OTCPK: NUGS) congratulates portfolio company The Asher House Wellness on its continuing drive to expand the Asher House mission. Most notably, company co-founders Lee Asher and Luke Barton appeared on ABC's The Ellen DeGeneres Show" this week to discuss their deep commitment to move dogs out of shelters and into loving homes on a national and international level. The Asher House team depends on sales of hemp-based "Asher House Wellness Thrive Oil" to fund outreach efforts, is also introducing new phytocannabinoid (CBD) products as part of the Asher House Wellness product offerings.
"We are so grateful for the continued growth of The Asher House. The more people know about the Asher House, the more dogs we will be able to rescue," said Lee Asher. "In addition, the more the community knows about and supports the Asher House Wellness and their industry-leading products that help dogs live well and thrive, the longer we will be able to continue our mission."
In 2017, the Asher House founders embarked on a cross-country mission to get dogs out of shelters and into loving homes. Since then the brand's co-founders have been traveling from state to state and Canada in an RV with six rescue dogs, working closely with local animal shelters or humane societies to set up dog adoption events. To date, the Asher House has successfully enabled the adoption of over 200 dogs.
Aurora Cannabis Inc. (NYSE: ACB) (TSX: ACB.TO) and Hempco Food and Fiber Inc. ("Hempco") (TSX-V: HEMP.V) recently announced that the companies have entered into a binding letter agreement (the "Letter Agreement") in regard to the basic terms and conditions upon which Aurora will acquire all of the issued and outstanding common shares of Hempco ("Hempco Shares") not already owned by Aurora. In consideration of the transaction, Aurora has agreed to pay $1.04 per Hempco Share, payable in common shares of Aurora ("Aurora Shares"), reflecting a valuation of approximately C$63.4 million on a fully diluted basis.
Hempco provides Aurora with low-cost, high-volume access to raw material (hemp) for the extraction of CBD, which has been increasingly recognized for its therapeutic benefits across a wide range of medical indications and wellness applications. Aurora identified this potential early on, completing its first investment in Hempco in 2017, and has subsequently expanded its hemp-based infrastructure through the acquisitions of Agropro, Europe's largest producer of organic hemp and hemp-based products, Borela and ICC Labs. The full integration of Hempco into this infrastructure adds further capacity, brands and distribution channels to capitalize on the global CBD wellness opportunity, which is anticipated to grow to $22 billion by 2022.
Puration, Inc. (OTCPK: PURA) recently reported over 350% year to year growth between 2017 and 2018. The Company filed its annual financial statement reporting over $1.2 million in revenue for year-end December 31, 2018 with over $500,000 in net profit. Management attributes the more than 350% revenue growth to the success of the company's EVERx CBD Sports Beverage. With the company's recently reported enhanced partnership with Kali-Extracts, ("KALY"), management expects cannabis beverage diversification and continued rapid growth in 2019. On Friday, this week, April 19th, 2019, PURA management will publish an online shareholder report with more details and insight on the company's 2018 growth and ongoing anticipated growth in 2019. The online report is expected to include updates on PURA's work with KALY to produce new beverages.
Aleafia Health Inc. (TSX: ALEF) (OTCQX: ALEAF) recently announced it will add 50,000 kg of extraction capacity with the Phase II expansion of the Company's processing facility in Paris, ON. The expansion will, when operational, see the Company's products and cultivation division, Aleafia Campus, maintain robust combined extraction and cultivation footprints across three facilities.
The expansion is expected to significantly increase the processing, extraction and packaging of high-margin derivative products including oils, capsules, sprays and other future formats under the Company's adult-use Symbl and medical Emblem brands. Additionally, the Company will offer tolling and white label services to other Licensed Producers looking to leverage the Company's extraction and packaging capabilities. Aleafia Health is currently purchasing the necessary equipment to meet or exceed the 50,000 kg capacity expansion, including milling, decarboxylation, CO2 extraction and winterization machinery. The Company believes that the 30,000 sq. ft. building expansion will provide significantly more space than is necessary to operate the new cannabis production lines.
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