Consolidation continues its domination of the cannabis space in 2018 as ABcann Global (TSXV:ABCN; OTCQB:ABCCF) seeks to acquire recognized licensed producer (LP) from B.C.

On Monday (July 30) ABcann announced a C$133 million deal for the complete acquisition of Canna Farms, the first B.C. producer to obtain an LP status in 2014.


Canna Farms is a producer with an current capacity of 2,700 kilograms indoor facility located in Hope, B.C. According to ABcann, Canna Farms’ capacity by the end of this year will be 6,900 kilograms thanks to a indoor facility expansion currently under construction.

 

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The B.C. producer purchase will cost ABcann C$22 million in cash and 92.5 million of its own shares. ABcann’s current production capacity in Napanee, Ontario will nearly triple once the deal is completed, which is expected to close in August.

“Fully funded future capacity by mid-2020 is expected to reach 57,000 kilos ABcann also has plans to supplement this capacity using certified third party suppliers,” Barry Fishman, CEO of ABcann said in a conference call with investors on Tuesday (July 31).

The new company intends to offer premium products for the recreational market, which is set to open in October 17 across Canada.

The new acquisition for ABcann touts a product portfolio of 51 cannabis strains and 5 different oil variations. ABcann’s acquisition indicates some of the value placed on product reviews and the cache a brand may have with established consumers.

Two executives from Canna Farms, Ray Laflamme and Daniel Laflamme, will join ABcann’s leadership team as senior vice president of facilities and engineering and president respectively.

After the deal is completed the two new executives will each own 16.1 percent of the company’s outstanding shares.

Conference call with investors offers more details on acquisition

As part of the conference call with investors, Fishman said a rough combination of the two companies Q2 2018 revenues would provide net sales of over C$4 million.

Canna Farms already has initial supply agreements for recreational cannabis with the provinces of B.C. and Manitoba. Daniel Laflamme said during the call Canna Farms will seek registration with other provinces in the country.

Observers of the industry have voiced support for companies that obtain supply deals as it provides a direct path to reaching adult-use cannabis consumers.

As part of ABcann’s presentation to investors on the new transaction, the Canna Farms medical franchise will bring the total number of patients for the company to 15,000, roughly 5 percent share of the Canadian medical cannabis market according to Fishman.

In March ABcann unveiled a partnership with Choom (CSE:CHOO; OTCQB:CHOOF), including a supply agreement with the retail and brand focussed company.

During the conference call Fishman was asked about the status of this partnership after announcing the Canna Farms acquisition. He answered that he wasn’t ready to speculate on it but guessed it could get “enhanced” thanks to the new acquisition.

Investor takeaway

Since the acquisition was revealed on Monday ABcann’s share price has jumped 11.40 percent as of 11:30 am EST during Tuesday’s trading session to reach a price of C$1.26 per share.

Aaron Salz, CEO of Stoic Advisory which acted as a financial advisory in this acquisition, tweeted the deal creates a new bi-coastal operator with C$110 million in cash for future development and an “international presence.”

Don’t forget to follow us @INN_Cannabis for real-time news updates!

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

 

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