International cannabis company Flora Growth Corp. announced this week that it has signed a deal to acquire Franchise Global Health Inc., a Germany-based multinational operator in the medical cannabis and pharmaceutical industries. The news comes the same week that German officials unveiled the government’s plan to legalize recreational marijuana, a move that would create Europe’s largest legal adult cannabis market.
Flora Growth is a global cannabis company with operations in five countries, including one of the largest outdoor marijuana growing operations in the world in Colombia. Under the terms of the transaction, Flora Growth will acquire 100% of the issued and outstanding common stock of Franchise Global Health (FGH). In return, Flora Growth will issue between 36,615,060 and 43,525,951 of its common shares to former FGH shareholders upon closing of the transaction. Completion of the agreement is subject to customary closing conditions, including shareholder and regulatory approval.
Franchise’s German business operates primarily in the pharmaceutical and medical cannabis export, import and distribution markets, serving 1,200 pharmacies in Germany and providing non-cannabis medical products to 28 additional countries. The acquisition is expected to accelerate Flora’s expansion into the European cannabis and prescription pharmaceutical markets, according to a Flora Growth statement, “and will provide the Company with immediate access to a wealth of knowledge and intellectual property developed by FGH, including 41 registered cannabis varieties in Colombia and the first registered cannabis seed bank in Copenhagen, Denmark, which contains 286 varieties.”
Germany unveils plan to legalize recreational marijuana
Flora Growth’s acquisition of Franchise was announced the same week German officials unveiled details of their plan to legalize the recreational use of cannabis for adults. Under the plan, which is not likely to be implemented until 2024 and is subject to review by the European Union, adults 18 and older would be allowed to possess between 20 grams and 30 grams (about one ounce) of cannabis for personal use.
Louis Murchan, chairman and CEO of Flora Growth, says the company’s new presence in Germany gives it access to additional emerging markets for legal cannabis in Europe.
“This acquisition is expected to give Flora Growth a decisive foothold in Germany, the region’s most important cannabis market,” Merchan wrote in an email. “Franchise Global Health will strengthen our international commercial revenue, give us access to pharmaceutical distributors and accelerate the flow of our medical cannabis in Europe.”
The acquisition of all shares of Franchise Global Health will result in the indirect acquisition of its subsidiaries, including Phatebo GmbH, based in Hilzingen, a leading distributor of export pharmaceuticals and medicinal cannabis products for the European Union, and ACA Müller ADAG Pharma Vertriebs GmbH (“ ACA Müller”), which holds the first German license to import and distribute medical cannabis, granted by state regulators in 2017.
In a statement, Murchan said that “we are connecting our commercial infrastructure and medical cannabis product portfolio to the medical markets in Germany and the EU, while gaining direct access to European pharmaceutical distributions. We believe the Franchise will significantly increase our commercial international revenue and provide key distribution in German pharmacies and the growing wholesale market.”
Flora Growth said the combined companies are “expected to provide at least $3.0 million in annualized cost synergies within the first year following closing of the acquisition, primarily in the areas of reduced corporate administrative expenses.”
“Louis and I share the same vision to create a leading and sustainable cannabis business. Flora has the right platform to execute this strategy through M&A and organic growth. We are thrilled to join forces,” said Clifford Stark, CEO and Executive Chairman of Franchise Global Health. “Together we have a solid revenue base, a proven consumer packaged goods business that can be replicated in Europe and a successful distribution network. Over the past few months, we have worked tirelessly to identify synergies, reduce costs and build an industry-leading team.”