London-listed marijuana business Kanabo (KNB.L) has struck a deal that it says will make it Europe's biggest publicly traded cannabis company.
Kanabo said on Monday it had agreed terms to buy the European operations of Canada's Materia, a cannabis processor and supplier. Exact terms weren't disclosed but Kanabo said the deal would be paid for through shares and subject to performance-related goals.
"The only part that we’re not involved in now in the supply chain is cultivation," Kanabo's chief executive Avihu Tamir told Yahoo Finance UK. "Our belief is that cultivation will be a commodity like other agricultural products. We believe the value is in the last mile."
Tamir said the deal was "significant" in size but Materia would be a minority shareholder post close. He predicted the transaction would close "very, very quickly." Kanabo and Materia already have commercial relationships and Tamir said the management teams knew each other well.
Materia owns a cannabis processing plant in Malta and a wholesaling business in Germany, which is the largest market for legal marijuana in Europe.
“It’s very unique because it allows you to make Malta the doorway to Germany and Europe in general,” Kanabo's chief executive Avihu Tamir told Yahoo Finance UK.
Materia's Malta plant has contracts with around 20 producers globally and is currently vetting them. It is already supplying German pharmacies with medical marijuana products.
In a statement to the stock market, Tamir said: "Together with Kanabo's R&D and commercialisation capabilities, I expect this enlarged group to become the biggest public cannabis company in the UK and EU and puts us in a unique position as the multibillion pound medicinal cannabis market begins to grow in Europe."
Kanabo makes vaporised marijuana pods and inhalers for medicinal use. The Israeli company also makes CBD products for the "wellness" market. The company listed in London in February, becoming one of the first businesses to come to market in the UK after the regulator relaxed rules around cannabis listings last year.
Tamir told Yahoo Finance UK: "Kanabo was until now focused on product development and commercialisation, our main market was the UK. As you know, the UK is still a small medical cannabis market. We think it will grow, but it is still small. Materia is playing in the biggest European market."
Materia's chief executive Deepak Anand said in a statement: "We are excited at the prospect of joining forces with Kanabo’s team.
"As the first medical cannabis company approved to list on the London Stock Exchange, Kanabo’s ambition to be a market leader matches our own and we believe that our combined infrastructure will generate significant value for our shareholders, partners, customers and patients.”
As part of the deal, Kanabo will extend a CA$2.5m (£1.5m, $2m) loan facility to Materia, with $500,000 available for drawdown immediately.
Shares in Kanabo shot up 7.8% on news of the deal, valuing the business at £60m.
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