Elixinol Global Ltd positions itself as a leading pan-European CBD company by

() (OTCQB:ELLXF) (FRA:E8M) has entered into a binding agreement for its subsidiary Elixinol BV to acquire CannaCare Health GmbH, a company incorporated in Germany for an upfront consideration of €9 million in cash and shares. 

Upon attainment of financial year 2021 revenues of €12.9 million and 20% EBITDA, the maximum earn-out of €15 million is payable in Elixinol shares, taking the total potential consideration to €24 million. 

The acquisition positions Elixinol as a leading pan-European CBD business and is expected to fast-track revenue and its path to profitability growth.

Investors have responded positively driving shares 18% higher to A$0.23 this morning. 

Transformational opportunity

Elixinol global chief executive officer Oliver Horn said: “We are incredibly excited about this transformational opportunity, which leapfrogs Elixinol closer to its vision of becoming a profitable, global, hemp-derived consumer goods wellness business.

“CannaCare was founded in 2018, is based in Hamburg and manufactures and distributes an extensive range of 20 CBD products, which are produced in Europe.

“CannaCare’s brand CANOBO has very quickly established itself as the leading brand in bricks and mortar retail with a total of over 4,500 distribution points, of which 2,200 are with Rossmann – Germany’s #1 drugstore chain; 680 with Mueller; 180 with Budnikowski and a further 1,500 individual pharmacies.

“CANOBO’s product range consists of CBD oils, sprays and cosmetic products with many of these being organic.

“CANOBO is Germany’s first CBD brand investing in broad reach media with numerous TV commercials having contributed to its wide consumer appeal.

“Similar to Elixinol, CannaCare pursues a capital-light model with an outsourced supply chain.

“All products are subject to strict quality controls and independent testing.

Quickly reach critical scale

“By acquiring CannaCare, we gain a strong foothold in Europe’s fastest growth market of Germany and, together with our established UK business, will become a leading pan-European business of scale.

“This acquisition enables us not only to quickly reach critical scale but importantly, opens up new opportunities to cross-sell our portfolios, leverage the new scale to reduce our cost of doing business and apply best practices across global business.

“CannaCare is a dynamic, high growth business with an outstanding leadership team.

“The announcement that CBD had been down scheduled in Europe late last year led us to move quickly to take advantage of what we see as being a highly strategic opportunity to accelerate our globalisation, grow revenue and accelerate our pathway to profitability.”

Boost to become leading German brand

CannaCare’s major shareholder and vendor Frank Otto added: “We are delighted for CannaCare to continue its impressive growth trajectory with Elixinol, a global trailblazer in the hemp-based food and wellness space.

“The compatibility of the businesses will give yet another boost to CANOBO on its trajectory to become the leading German brand in the fast-growing CBD market.”

Key agreement terms

The purchase price will be paid in two tranches to the vendors, Otto, Annette-Rosa Oplesch and an entity associated with Michael Oplesch.

The first tranche will be payable on completion of the transaction and will compromise €3 million in cash, funded from existing cash reserves, and €6 million through the issue of fully paid ordinary Elixinol shares.

Based on an agreed price of shares of A$0.2105, the number of shares proposed to be issued to the vendors in the first tranche is 43,864,133, which represents 14% of Elixinol’s current issued capital.

The first tranche shares will be subject to voluntary escrow from their date of…