TORONTO: Flora Growth Corp. (NASDAQ: FLGC), a leading all-outdoor cultivator, manufacturer and distributor of global cannabis products and brands, has completed the acquisition of Franchise Global Health Inc. (TSXV: FGH), a multi-national operator in the medical cannabis and pharmaceutical industry, with principal operations in Germany.
“We view this acquisition as transformational as Flora pursues its strategic growth plan to lead the global market for cannabis and its derivatives,” said Luis Merchan, Chairman and CEO of Flora Growth Corp.
“Flora has now secured a crucial footprint in an established international cannabis market, providing a unique opportunity for operational synergies and diversified growth. The acquisition adds to our distribution network, expanding our client base, and increases our ability to distribute wholesale cannabis products at scale into the European Union.”
At the end of November, Flora announced it achieved revenues of $25.7 million and gross profit of $11.5 million for the nine-month period ended September 30, 2022, representing increases of 510% and 606%, respectively, year over year.
As of September 30, 2022, the Company had cash of $5.9 million. On December 13, 2022, Flora raised gross proceeds of $5.0 million through a registered direct offering, further bolstering its liquidity position.
FGH’s revenues and gross profit for the nine-month period ended September 30, 2022 were C$42.0 million (~US$32.7 million) and C$2.8 million (~US$2.5 million), respectively. FGH’s German reportable segment earned C$0.6 million (~US$0.5 million) in net income for the same period.
FGH’s Germany medical cannabis businesses operate primarily in the pharmaceutical, medical device and medicinal cannabis import and distribution markets, servicing more than 1,200 pharmacies in Germany and providing non-cannabis medical products to 28 additional countries.
The transformative deal accelerates Flora’s expansion in Europe’s largest medical cannabis market as Germany moves toward the launch of an adult-use market estimated to be worth over $1 billion1 by 2026. The Company believes Flora and FGH’s combined wealth of knowledge and intellectual property position the Company well for the potential incoming recreational market.
“We are glad to complete this acquisition as we head into 2023. Together, we can now offer one of the world’s leading cultivators access to the burgeoning German market and establish new inroads into other markets in the European Union,” said Clifford Starke, CEO of Franchise Global Health.
The medical cannabis market in Germany is valued at roughly $122 million2, with growth of ~25% in 2021 compared to 2020 and a CAGR of ~55% since 2017. An estimated 150,000 German patients benefit from medical cannabis and 90% of Germany’s population of 83 million people are covered by statutory health insurance.
The transaction was consummated by way of a statutory plan of arrangement (the “Arrangement”) under the Business Corporations Act (British Columbia), pursuant to which Flora acquired all the issued and outstanding common shares of FGH in exchange for 43,525,951 Flora common shares.
The Flora common shares delivered to the former shareholders of FGH are restricted from being sold for a period of ninety (90) days following the completion of the Arrangement. Effective upon the closing of the Arrangement, Mr. Starke, formerly the CEO of FGH, and Mr. Edward Woo, formerly the COO of FGH, were appointed as members of Flora’s Board of Directors.
The Arrangement was approved by the Supreme Court of British Columbia and by shareholders of FGH holding in excess of 66 2/3% of the votes cast at a meeting of FGH shareholders. For further information on the Arrangement, reference is made to Flora’s current report on Form 6-K, filed today with the Securities and Exchange Commission.