Debra Borchardt
Flora Growth Corp. (NASDAQ: FLGC) announced it is buying German-based medical cannabis company Franchise Global Health Inc. (TSXV: FGH) (“FGH”) for an undisclosed amount. However, Flora Growth did note in a statement that FGH’s German reportable segment achieved revenues of C$30.1 million, gross profit of C$2.1 million, and net income of C$0.4 million in the first half of 2022.
The combination of Flora and FGH is expected to deliver at least $3 million of annualized cost synergies within the first year following the completion of the acquisition, primarily in the areas of reduced corporate administrative expenses. Flora Growth stock popped over 5% in early trading on the news and was lately selling at 56 cents per share.
“Through this proposed acquisition, we are connecting our commercial infrastructure and medical cannabis product portfolio to the German and EU medical markets, while gaining direct access to European pharmaceutical distributions,” said Luis Merchan, Chairman and CEO of Flora Growth. “We believe Franchise will significantly increase our commercial international revenue and provide essential distribution to German pharmacies and a growing wholesale market.”
International Moves
FGH’s German businesses operate primarily in the export pharmaceutical and medical cannabis import and distribution markets, servicing 1,200 pharmacies in Germany and providing non-cannabis medical products to 28 additional countries. Flora Growth has set its sights on the European cannabis market. Last month the company said it had completed its first exports of Colombian-grown high-CBD dried cannabis flower to Switzerland and the Czech Republic as well as CBD isolate to the United States. Switzerland recently announced a pilot project to open adult-use cannabis sales this summer in Basel, to test the viability of a fully legal recreational market.
“Luis and I share the same vision of establishing a leading and sustainable cannabis business. Flora has the right platform to execute on this strategy through M&A and organic growth. We are excited to join forces,” says Clifford Starke, CEO and Executive Chairman of FGH. “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.”
Germany
Last week, a document about German adult-use cannabis legalization (that was supposedly leaked) jump-started attention on the country’s cannabis industry. If adult-use cannabis is approved in Germany, it would become the largest federally legal cannabis market in the world, with an adult population of nearly 70 million.
