Cannabis products manufacturer Flora Growth Corp. (NASDAQ: FLGC) announced last week that it has signed a definitive agreement to acquire 100% of Franchise Global Health Inc. (TSXV: FGH), a multinational operator in the medical cannabis and pharmaceutical industry with principal operations based in Konstanz, Germany.
“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.”
Franchise Global Health reported revenue of approximately $23.4 million USD for the 6 months ended June 30
FGH’s German reportable segment achieved revenues of $30.1 million CAD, gross profit of $2.1 million and net income of $0.4 million in the first half of 2022. 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.
This acquisition is expected to accelerate Flora’s expansion into the European cannabis and pharmaceutical markets with prescription medicines and would provide the company with immediate access to intellectual property that FGH has developed, including 41 registered cannabis strains in Colombia and the first registered cannabis seed bank in Copenhagen, Denmark housing 286 strains. The proposed acquisition would further allow Flora to expand its CBD business in Europe by utilizing FGH’s distribution and logistics capabilities.
The combination of Flora and FGH is expected to deliver at least $3 million USD of annualized cost synergies within the first year following the completion of the acquisition, primarily in the areas of reduced corporate administrative expenses.
“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.”
The proposed all-stock acquisition of Franchise Global Health Inc. will result in Flora’s indirect acquisition of its subsidiaries, including the Hilzingen-based Phatebo GmbH, a distributor of export pharmaceuticals and medical cannabis products to the European Union and ACA Müller ADAG Pharma Vertriebs GmbH (“ACA Müller”), which holds the first German medical cannabis import and distribution license, granted in 2017.